The UK government is set to sign off a loan agreement for Saudi Aramco as the capital looks to host the world’s largest initial public offering.
After carrying out due diligence, the UK treasury has said it is now “finalising” the credit backstop through its UK Export Finance (UKEF) group, which provides foreign companies the credit lines and guarantees needed to buy British goods.
The kingdom will float just 5% of the company in a stock market floatation as part of an economic reform programme, led by the country’s Crown Prince, Mohammed bin Salman, who believes the company could be worth $2 trillion.
London and New York are competing to host the IPO with both governments lobbying to attract the state-owned oil giant.
Earlier this year Prime Minister Theresa May travelled to Saudi Arabia with the London Stock Exchange CEO, Xavier Rolet, to discuss the advantages of listing in London. Meanwhile President Donald Trump took to Twitter last week to urge Saudi Aramco to list in New York.
Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!
— Donald J. Trump (@realDonaldTrump) November 4, 2017
One person familiar with the transaction, which will be the second largest of its kind after the $2.1 billion guarantee to Oman in support of the purchase of the BAE Systems military hardware, suggested the loan is a “desperate” effort to win the IPO. Another highlighted the “suspect” timing of the deal, which coincides with the UK bid.
As the UK prepare to leave the EU, they are increasingly looking at the Arab Gulf as priority trading partners, focusing on Saudi Arabia and the UAE due to the existing relationships and relative ease of trade.
The UK Treasury spokesperson said: “In the coming months, UKEF will be running a series of exporter events to help connect British suppliers with Aramco to fully realise the mutual benefits of this support.”