Banks to sue Dubai Group's US$10 billion loans in debt pile

DUBAI: Royal Bank of Scotland (RBS) and two other banks have begun legal proceedings against an investment vehicle owned by Dubai's ruler, an unprecedented move to secure repayment after two years of unsuccessful debt talks.

RBS, along with German lender Commerzbank and South Africa's Standard Bank, had threatened legal action after walking away from negotiations over Dubai Group's US$10bil debt pile, sources said in July.

The banks began legal proceedings in a London court on Sept 6, breaking with the precedent in previous restructuring cases involving Dubai state-linked entities because of the opaque and untested insolvency system in the United Arab Emirates (UAE).

Given the complexities of the case, in particular the lack of precedent, the London filing threatens to extend debt talks well into the future, having dragged on since Dubai Group missed interest payments on two facilities in late 2010.

“Arbitration could be two years and we don't want to see the destruction of shareholder value just because these banks have thrown their toys in the corner,” said a source.

In a statement, RBS said it was forced to take action after several concessions offered to the group failed to secure a solution.

“We do, however, want to make clear that our preference was always to conclude an agreement without formal legal proceedings and we therefore remain open to such an outcome if an acceptable commercial resolution is forthcoming,” it said.

Such sentiment adds fuel to the belief that the legal action is more likely a negotiating tactic on behalf of the three banks all of which are unsecured creditors to secure a better deal from Dubai Group.

“They are unsecured and have nothing so they are doing it out of desperation or because they expect the Dubai government will bail out the group,” said one UAE-based banker.

The government walked away from debt talks in January, dashing any hope creditors had of state support.

Dubai Group, a unit of Dubai Holding which is the investment arm of Sheikh Mohammed bin Rashid al-Maktoum, was hard hit by the global financial crisis in 2008 due to excessive use of leverage in its investments and a sharp decline in the value of its portfolio companies.

Like a number of other state-linked entities in the emirate, it embarked on talks with creditors to restructure debt and extend maturities.

The London filing comes at a time when others on the restructuring are considering a proposal, put to the group before the summer, which would see all lenders extend their obligations to allow for Dubai Group's asset values to recover before they are sold.

Debt extensions range from 3 years for secured creditors up to 12 years for unsecured creditors. The sheer length of time is the main concern for the three banks because of the cost it would impose on unsecured lenders to extend cash for so long.

“Over 35 banks are working towards an agreement and a global term sheet is now being considered by bank credit committees, a number of which have indicated their support,” Dubai Group said in a separate statement. “We believe that we can reach a consensual agreement with our creditors.” - Reuters

iPhone 5 opens the door for Nokia, Samsung

There's no doubt that the iPhone 5 is going to be a great, fast-selling smartphone, but it's out-innovated by Nokia and Samsung.

  (Credit: Sarah Tew/CNET)

 

News flash: The iPhone 5 is not the end-all and be-all of the smartphone universe, a fact that should thrill Nokia and Samsung alike.

Here's what it is: a strong improvement to the iPhone 4S that offers up a larger screen, 4G LTE speeds, and a terrific camera. The iPhone 5 carries on the goodness that Apple excels at, like iTunes entertainment and cloud storage.

But however good the iPhone 5 is, it lacks the knockout, gasp-inducing feature that Apple followers have come to expect: perhaps double the battery life of any other phone on the market, or an innovative camera feature that lets you drag and drop subjects around the screen, or other far-out concepts come to life.

Instead, we see a lot of catching up: LTE support, panorama mode, and photo capture while a video records, maps with turn-by-turn navigation, and a slightly larger screen with the same pixel density as on the iPhone 4 two generations ago. And it still lacks certain other perks, like NFC, which is useful for mobile payments, and for sharing content from phone to phone.

For the first time in a long time, Apple has given its rivals room to bask in their own innovations.

Samsung's Galaxy Note 2 is the anti-iPhone.

(Credit: Jessica Dolcourt/CNET)

 

The Nokia's Lumia 920 offers wireless charging, for example, a capability it'll pilot in coffee shops and airline lounges. Its camera is literally surrounded by springs, and the screen uses a very smart display filter that could match or even surpass the iPhone 5's display (we have to wait to see them side by side.

Meanwhile, Samsung's Galaxy Note 2 offers up an enormous 5.5-inch screen and a truckload of tricks with its S Pen stylus, and a new camera feature that will compile the best of a handful of group photos, increasing the chances that everyone's smiling. Its phone/tablet hybrid is the antithesis of the smaller iPhone screen.

On the battery front, Motorola's new Motorola Droid Razr Maxx HD can't be beat; it features a powerful 3,300mAh battery that promises 21 hours of talk time to Apple's 8 hours of talk time over 3G on the iPhone 5.

Make no mistake that the iPhone 5 will sell like wildfire and bring delight to Apple fans everywhere -- in fact, I even think it makes for a great universal choice.

Yet its lack of a "gotcha" feature gives shoppers considering other powerful alternatives -- like the intriguing Lumia 920, the larger-than-life Samsung Galaxy Note 2, or even the won't-quit Motorola Droid Razr Maxx HD -- fewer reasons to stick with Apple.

 by Jessica Dolcourt 

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Reducing income tax

I BELIEVE that the path to economic recovery in Europe and for the rest of the world will be a very long journey this time.

It needs all sorts of new ideas to test and try, as old ideas used previously to boost the economy may not work this time, as you still hear some countries considering another round of quantitative easing and financial bailouts.

Perhaps certain administrative policies of these countries may have to be tweaked but they have not done so.

One aspect that I wish to discuss here is the taxation policy, which Malaysia can reap benefits from and put itself on a level playing field with Singapore and Hong Kong.

The taxation policy of a government can impact the level of disposable income of households (i.e. after-tax income).

A tax increase will reduce household income, as it takes more money out of household.

A tax decrease, on the contrary, will increase disposable income, because it leaves households with more money.

Disposable income is the main factor driving consumer demand and thereafter, pull a sluggish economy out of recession.

Despite this knowledge, some countries in Europe had begun raising tax rates, especially on value added tax/sales tax on products and services.

Recently, I read that France is planning to increase the top tax rate for individual income tax to 75%. That is to say, the more you earn there, the less money you can take home after paying your taxes.

Individuals are also consumers. As consumers have less money to spend (since most of the money is used to pay tax), they are likely to cut down on spending.

As a result of “careful” consumer spending, businesses (which are also paying taxes) will derive lesser income and thereafter, pay lesser tax.

This is because the income that is subject to tax is less, therefore, the tax amount will also be less.

So, instead of the intended effect of higher tax revenue from tax hikes, the tax revenue will go down instead.

So, what is the solution?

The answer – major reduction of individual income tax rates.

Let people pay less tax and have higher take-home pay (after tax) and encourage them to spend more.

In the case of Malaysia, a major reduction in individual income tax rates should slow down the effect of brain-drain of our talented individuals to overseas countries and help the country to retain the “tax base” or “tax-paying individuals”.

KEVIN TEO Singapore

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Time to reform Malaysia's tax system?