Bank ABC has secured the backing of Italian export credit agency Sace for a €24.9mn loan it has provided to a Saudi paper manufacturer.

The proceeds of the loan to the Saudi Paper Manufacturing Company will be used to purchase machinery from Italian exporter Toscotec.

Sace is providing a guarantee for two-thirds of Bank ABC’s risk, a spokesperson for the Bahrain-headquartered lender says.

The deal is structured as sustainability linked. Under the arrangement, Saudi Paper must maintain third-party certifications such as from the Forest Stewardship Council, demonstrate increased use of recycled materials by its recycling subsidiary and, from 2025, begin improving water usage and greenhouse gas emissions.

Pricing on the five-year deal will move up or down depending on performance against the targets.

Bank ABC says it is the first time it has structured a bilateral sustainability-linked credit facility supported by an ECA.

“Bank ABC’s competitive interest rates and unwavering support have positioned Saudi Paper Group for continued success and strengthened its commitment to driving the Kingdom [of Saudi Arabia]’s industrial growth,” says Saudi Paper board member Abdulaziz Raed Al Mashal.

Antonio Bartolo, a regional director at Sace, adds: “The paper industry is an Italian excellence and Sace’s role is to help and support Italian companies in gaining recognition and generating additional business opportunities in strategic markets such as Saudi Arabia.”

Sace has also recently agreed to back a €1bn commercial loan to Saudi Arabia’s finance ministry, provided by a club of commercial lenders.

The agency hopes the financing will help Italian exporters gain a foothold in the supply chains of several large projects currently being planned or constructed in the kingdom.