Involved in the biosynthesis of the antitumor antibiotic sibiromycin (PubMed:19270142, PubMed:21612226). Hydroxylates the C5 position of the peptidyl carrier protein (PCP)-bound 4-methyl-3-hydroxyanthranilic acid (4-MHA or 3H4MAA), leading to the formation of the fully substituted anthranilate moiety found in sibiromycin (PubMed:21612226). 3-hydroxy-4-methylanthranilyl-[aryl-carrier protein] + H(+) + NADH + O2 = 3,5-dihydroxy-4-methylanthranilyl-[aryl-carrier protein] + H2O + NAD(+) kcat is 88 min(-1) with SibE-PCP-3H4MAA as substrate. Antibiotic biosynthesis. Belongs to the aromatic-ring hydroxylase family.