UK Government Agrees to $2b Loan Guarantee For Saudi Aramco

The U.K. government agreed to a $2 billion loan guarantee for Saudi Aramco as competition to host the likely largest in history IPO heats up, according to Bloomberg.

“The unusually large export credit guarantee, designed to finance the purchase of British goods, will be seen by many as an attempt to help woo the IPO to the London Stock Exchange, the most viable venue for the international portion of the sale aside from New York,” Bloomberg writes.
The loan guarantee follows a public plea on Twitter by U.S. President Donald Trump for Saudi Aramco to choose the NYSE as the home to the international portion of the listing, saying he “[w]ould very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!”

According to Bloomberg, a former senior official at the U.K. Treasury criticized the deal as “an affront to free markets.” The government “guaranteeing a loan to Aramco would be a further lurch in descent to mercantilism,” Nicholas MacPherson, who was the most senior non-elected official at Britain’s finance ministry until 2016, said on Twitter. He finished the tweet with the hashtag #stateaid.

As SUSTG wrote yesterday, since announcing that it would do an IPO as part of its Vision 2030 reform plans, Saudi Arabia has purposefully kept its options open. It is possible that Saudi Aramco will not list shares publicly after it was reported that it may take a direct investment in the company, or that it may list the company, but locally on the Tadawul, Saudi Arabia’s stock market.