The Gulf Arab emirate, which has been slowly recovering from a crippling 2009 debt crisis, is tapping debt markets again nearly a year after it issued a $500 million bond.

It selected HSBC Holdings (HSBA.L), Citigroup Inc (C.N), Dubai Islamic Bank DISB.DU and National Bank of Abu Dhabi NBAD.AD for the issue, said the sources who spoke on condition of anonymity.

"The books will open soon, probably tomorrow or the day after," said one source familiar with the matter.

The government is mulling a dual-tranche dated issue which may be an Islamic bond, or sukuk, said one of the sources. The inclusion of Dubai Islamic Bank on the deal indicates the government will likely opt for an Islamic structure.

Dubai set up a $4 billion medium-term notes program in 2008 which it raised to $5 billion last year. It recently updated its bond prospectus.

The emirate last tapped debt markets in 2011 when it issued the $500 million, 10-year bond with a five-year put option, allowing investors to redeem their investment ahead of maturity at full value.

That bond was last bid at near 103 levels, according to Thomson Reuters data, to yield 5.2 percent.

Helped by an economic revival in trade and tourism and its safe-haven status amid the Arab Spring civil uprisings, Dubai is recovering from the depths of its debt crisis.

The emirate is still battling to reduce or restructure debt levels at state-linked firms. Investors are closely watching a pair of significant upcoming maturities at Jebel Ali Free Zone (JAFZA) and DIFC Investments. The two have a combined $3.25 billion due in 2011.

Dubai's 2012 budget has a shortfall of $498 million, a smaller deficit than 2011 as spending on development projects in the debt-laden Gulf Arab emirate decreased.

The emirate's five-year credit default swaps have narrowed dramatically since the emirate was hit by the debt crisis.

Spreads stood at around 370 basis points on Tuesday, far below levels of around 650 basis points hit after its flagship conglomerate Dubai World DBWLD.UL announced it needed to restructure some $25 billion in debt in late 2009.

(Additional reporting by Mirna Sleiman; Writing by Amran Abocar; Editing by Dinesh Nair)

• A Permanent Economic Emergency