Marafiq, a utility services provider to two industrial cities in Saudi Arabia, may conduct a debut local currency bond issue after picking HSBC's Saudi Arabian arm to advise it on raising new corporate debt.

"It is likely to be a debt capital markets transaction," a company spokesman told Reuters by email in response to questions. He said HSBC had been appointed to advise on the fund-raising but that a target amount had not yet been decided.

The company, which counts Saudi Basic Industries Corp , Saudi Aramco and state-owned Public Investment Fund as shareholders, will use the money for general business activities, three banking sources told Reuters on Monday.

Should Marafiq choose the capital markets route, a deal would likely surface either late this year or early in 2014, one of the sources said. Traditionally, it can take a number of months between deciding to complete a maiden bond deal and coming to market, given the lengthy documentation process.

Saudi companies looking to raise funds have increasingly turned to the kingdom's debt capital markets as they aim to diversify funding sources away from bank loans and take advantage of high investor liquidity.

National Shipping Co of Saudi Arabia (Bahri) is considering a debut Islamic bond issue to help refinance debt taken on for its $1.3 billion acquisition of Saudi Aramco's marine unit last year, sources told Reuters earlier this month.

Meanwhile, Savola Group, Saudi Binladin Group, Almarai and Sadara Chemical Company have all priced this year or are in the process of printing local currency sukuk deals.

Marafiq's last fundraising was a 4.5 billion riyal ($1.2 billion) long-term Islamic loan, signed in February 2012 with five Saudi banks, to help fund its expansion plans. HSBC was also financial adviser on that transaction.

Marafiq is tasked with providing water, wastewater and power services to the industrial cities of Jubail, on the eastern coast of the kingdom, and Yanbu, on its western coast. – Reuters