This paper investigate the impact of government share ownership on the cost of corporate debt. Government ownership might carry an implicit debt guarantee that reduces the chance of default and, hence, leads to a lower cost of debt. On the other hand, government ownership could lead to a higher cost of debt by providing an implicit debt guarantee that increases moral hazard for managers and by imposing social and political goals that reduce corporate profitability and thus increase default risk. Using a sample of 1,279 bonds issued by 215 firms subject to changes in government share ownership from 43 countries over 1990-2010, we find that government ownership is associated with lower spreads during the 2008-10 financial crisis, during various banking crises, for highly-levered firms, and for non-investment grade bonds. That is, in times of economic recession or firm distress, the dominant effect is the reduction in perceived default risk. Further, we find that the effect is specific to domestic government ownership, also consistent with the notion that the main channel of impact is the debt guarantee, and we document that the impact of government ownership differs by type of government entity. Outside of crises, government ownership generally leads to a higher cost of debt.