NYSE looks to allay Saudi Aramco fears ahead of listing

Alex Ibrahim, head of international capital markets for the New York Stock Exchange (NYSE), said that all the world’s other major oil firms had chosen to list on the NYSE. (AN Photo)
Updated 09 March 2018

NYSE looks to allay Saudi Aramco fears ahead of listing

NEW YORK: Only Wall Street can offer Saudi Aramco the exposure to capital that it needs for a successful public listing, according to a top New York Stock Exchange (NYSE) executive.
Alex Ibrahim, head of international capital markets for the New York Stock Exchange (NYSE), told Arab News that all the world’s other major oil firms had opted for NYSE.
It comes as Saudi Arabian officials eye several global bourses to sell 5 percent of the national oil company via an initial public offering (IPO) expected later this year.
“If you look at the US capital markets and compare it to London Hong Kong, look at the size of this market and how many companies in the oil center are listed here,” Ibrahim told Arab News at the 225-year-old Wall Street institution.
“The two largest oil companies from the United Kingdom are listed here. We trade them more here than in the local market. This is a very deep market for the oil sector and (Aramco) should take that into consideration when they decide.”
London, Hong Kong and other bourses have less experience with “very large complex transactions” like the looming Aramco share sale, which could raise some $100 billion or more in what would likely be the world’s biggest IPO, added Ibrahim.
He spoke as Crown Prince Mohammed bin Salman concluded a three-day visit to Britain, which is also fighting to win the prize listing.
New York and London have long been the front runners to host a potential international leg of the flotation, alongside a Riyadh listing.
On Thursday, Saudi Energy Minister Khalid Al-Falih expressed fears about the risks Aramco would run by choosing New York as the venue for its market offering, saying that “litigation and liability are a big concern in the US.”
Companies face a heavy regulatory burden when they list publicly in the US. Saudi oil chiefs are understood to be anxious about law suits over everything from climate change to anti-terror financing rules.
Saudi Arabian Oil Co, known as Saudi Aramco, has prepared for the IPO to take placeas early as this year.
Saudi Aramco has been valued at as much as $2 trillion — more than six times the value of Exxon Mobil.
A deal of that size would be a prize for the world’s leading stock markets, and they’re lobbying fiercely for the business.
Chris Taylor, NYSE’s vice president of listings and services, said:
“Over the last four years, there have been 38 IPOs in the US that have raised $700 million or more. Every single one of them chose the NYSE as its bourse.”
The IPO is a cornerstone of the Kingdom’s Vision 2030 social and economic transformation blueprint,
Proceeds from the sale will be pumped into technology, tourism and other sectors.


No more spending excuses for Merkel as investment bottlenecks ease

German Chancellor Angela Merkel gestures at her arrival for the government’s ‘Open Door Day’ in Berlin on Sunday Sam sit fuga. Et laut ute odi cum as elit. (Reuters)
Updated 23 min 12 sec ago

No more spending excuses for Merkel as investment bottlenecks ease

  • German leader urged to boost public investment by taking on new debt Sunducim velessunt alis plabore sernatur

BERLIN: German Chancellor Angela Merkel has fended off growing calls for more fiscal stimulus by citing the slow outflow of existing federal funds — but data suggests the money is indeed being used up as local authority bottlenecks gradually clear. With Europe’s largest economy on the brink of recession and borrowing costs at record lows, Merkel has faced pressure at home and from abroad to ditch her pledge to target balanced budgets and instead boost public investment by taking on new debt.
Merkel and her conservatives say Berlin has already earmarked billions of euros in investment for schools, nurseries and hospitals but that local authorities have spent only a fraction of this windfall.
But this excuse seems no longer valid: Figures from the Finance Ministry show that towns and municipalities are now tapping the federal government’s funds more actively, suggesting that planning and labor bottlenecks are easing.
Of €3.5 billion ($3.9 billion) earmarked in a municipal infrastructure fund for investment in schools, nurseries and hospitals (KInvFG I), local authorities have applied for nearly €3.4 billion, the data showed — roughly 96 percent of the overall amount on offer.
The fund was created in 2015 and initially meant to last until 2018. Due to the slow initial take-up, it was then extended to 2020.
Of another €3.5 billion put aside by the government in 2017 for school renovations (KInvFG II), authorities so far have tapped €2.4 billion, or 69 percent.

HIGHLIGHTS

• German towns tap into federal funds more actively.

• Improved outflow raises pressure to provide more money.

• Coalition parties at odds over debt-financed stimulus.

“As you can see, the program is running very well,” a Finance Ministry spokeswoman said, adding that the take-up had jumped by nearly €2 billion over the past 12 months.
“The figures show that there is planning progress in most federal states and that financially weak municipalities welcome the financial aid from the federal government,” she added.
The improved flow of funds is important for Germany, where heavily indebted towns and municipalities historically manage a large chunk of public spending and many citizens are annoyed by run-down local infrastructure and closed public facilities.

Austerity
Years of austerity linked to the national debt brake — a constitutional amendment introduced in the wake of the global financial crisis of 2008/09 to rein in public debt — have led to pent-up public investment needs in towns and municipalities worth a combined €138 billion, data from KfW Research shows.
“Towns and municipalities have been structurally underfunded for more than 20 years. They were forced to cut staff,” Gerd Landsberg, managing director of the German Association of Towns and Municipalities, told Reuters.
“That partly explains the initial problems with the slow take-up of federal funds — it takes time to hire new staff and get the ball rolling,” Landsberg explained.
The latest figures show, however, that authorities are overcoming those staff-related planning bottlenecks, meaning most of the money should be used up soon, he said.
Landsberg called on the government to provide more funding lines and improve the design of its programs.
“Short-term investment funds alone do not provide sufficient planning and personnel security. We must secure the financial strength of towns and municipalities in the long term.”
Like Merkel and her conservatives, Finance Minister Olaf Scholz of the jointly governing, center-left Social Democrats (SPD) has shown little appetite so far to ditch the balanced budget goal and boost investments through new debt.
Eckhardt Rehberg, the chief budget lawmaker in Merkel’s conservatives, is also sticking to the line that billions of euros still sit unused in various special-purpose funds.
“The debate about debt-financed investment programs misses the point. The problem is not a lack of money, but the sluggish outflow of funds,” Rehberg said.
Authorities must hire more staff, cut red tape and speed up planning and approval procedures, he said. “In addition, the construction sector has already reached its capacity limit, which means it can hardly cope with more demand,” Rehberg added.
Nevertheless, members of both the SPD’s own left wing and of the Greens, an increasingly strong opposition party, are pushing for a fiscal U-turn. Even the influential BDI industry lobby group, traditionally close to Merkel’s conservatives, last week called for a debt-financed fiscal stimulus package.
Cansel Kiziltepe, a lower house SPD lawmaker specializing in finance, said Merkel and the conservatives should stop blaming local authorities and rethink their insistence on incurring no new debt in their budgets, a policy goal commonly known as the “black zero.”
“Especially in times of economic weakness and in light of improved outflow of funds, it’s high time to say goodbye to the fetish of the black zero,” Kiziltepe told Reuters.