Euro High-Grade Corporate Bond Issuance Down 25% In 2011-Dealogic

Euro-denominated investment-grade corporate issuance is down 25% on 2010 to the lowest level since 2005, data provider Dealogic said in a report Wednesday.

Volumes for the year to Nov. 22, stand at EUR98.6 billion. Following zero issuance in August, third-quarter volumes totaled a low EUR16.7 billion, well down on the EUR26.3 billion issued in the third quarter of last year, Dealogic said.

The high volatility in credit markets and the lack of any resolution to the euro-zone debt crisis has left investors directionless, although sporadic windows of opportunity allowed some corporate issuers to come to market.

Elsewhere, U.S. issuers in euro-denominated debt recorded the largest year-on-year volume decrease with issuance down 51% to EUR3.1 billion in the year to Nov. 22 from EUR6.3 billion in the same period in 2010, Dealogic said.

For a second year running, French corporates issued the largest proportion of euro-denominated bonds, despite volumes dropping 31% on the year to EUR30.3 billion in 2011, it said.

However, market volatility is only one factor affecting the decline of French corporate issuance, with the rising cost of debt also holding some borrowers at bay.

Comparing July and November new issue premiums paid by some French corporates, as witnessed in the Tuesda's deal by French media group Vivendi SA (VIV.FR) deal Tuesday, provides some insight into declining volumes.

Vivendi was in the market with a EUR500 million four-year deal that priced at 215 basis points over midswaps with a new issue premium of 50 basis points. The EUR500 million seven-year deal priced at 265 basis points over midswaps and at the wider end of initial guidance, with a new issue premium of 55 basis points.

Back in July, Vivendi issued a four-year bond at 95 basis points over midswaps paying a premium of 10 basis points and a 10-year bond at 145 basis points over midswaps, paying a premium of seven basis points.

"The deals were a massive struggle...highlighting that even with 'attractive' premiums the market is fatigued by the number of French borrowers in the market," said Suki Mann, credit strategist at Societe Generale in a recent note.

The French corporate sector as a whole has been noticeably active this year and some market participants think it is because they have reduced access to funding from banks and need additional liquidity.

-By Sarka Halas, Dow Jones Newswires; [phone]; [e-mail]