Nakheel has confirmed that it will repay its $3.5bn sukuk (Islamic bond), which matures today, thereby avoiding a default.

The Dubai-based property developer says it will repay the full amount with 14 days, as allowed under the terms of the sukuk.

The money to repay the bond will come from the Dubai Financial Support Fund, the Dubai government body set up to help companies in financial distress. The government of Dubai announced on the morning of 14 December that the government of Abu Dhabi had given the fund a further $10bn.

The total repayment made by Nakheel will be $4.1bn, which includes interest costs and an additional premium payable under the terms of the sukuk because Nakheel has not listed its shares on a stock market.

The Nakheel sukuk is due to be repaid on 14 December, but under the terms of the contract it has a 14-day grace period to make the payment before it is declared to be in default.