Saudi Basic Industries Corporation (Sabic) said on Tuesday liquidity conditions were appropriate for its upcoming Islamic bond sale, which the Arab world's biggest publicly traded company will use to fund projects.

Sabic, the world's largest chemicals firm by market value, won regulatory approval this week to sell as much as 5 billion riyals ($1.33 billion) of Islamic bonds. The five-year bonds will be denominated in dollar-pegged Saudi riyals.

"The time is appropriate because this is the time when the Islamic financial market is developing and secondly, liquidity in the Saudi riyal is abundant in the Saudi market," Sabic Chief Financial Officer (CFO) Mutlaq Al-Morished told Al-Arabiya television.

Several Gulf Arab borrowers scrapped sales of Islamic bonds, or sukuk, last year because of the credit crunch triggered by US mortgage defaults which made borrowing more expensive and banks more reluctant to lend.

Meanwhile investors have piled into riyals since late last year on expectations the world's largest oil exporter could sever its currency's peg to the US dollar - boosting appetite for securities denominated in Gulf Arab currencies.

Sabic's 10-day sukuk sale starts on Saturday and ends on May 12. The sale is open only to nationals of Gulf Arab states, who must bid for at least 10,000 riyals worth, Sabic said in a statement.

HSBC Saudi Arabia and Calyon Saudi Fransi are joint lead managers for the sale, it said.

Saudi Arabia has been awash with liquidity as oil prices jumped almost six-fold in the last six years, creating the perfect climate for a bond sale in Gulf currencies, Al-Morished said.

"It's a chance for us to enter the market in riyals," he said.

Last July, Sabic said it planned to raise up to $5 billion through a programme of Islamic bonds to fund expansion.

Al-Morished said on Tuesday that the upcoming bond sale would be used "to fund projects and for general expenditures".

Sukuk comply with Islam's ban on the payment or receipt of interest. (Reuters)