The Wall Street Journal - 21.10.2019

B6| Monday, October 21, 2019 THE WALL STREET JOURNAL.

nue in Hong Kong, where it

began in 1865.

Mr. Quinn said the bank

continues to win business

from Chinese clients despite

the Huawei tensions, a person

familiar with his comments

said. Data show HSBC worked

on several Chinese bond deals

last month, including for

state-owned banks.

In 2017, HSBC supplied U.S.

investigators with details of

what Huawei told the bank

about its business in Iran, ac-

cording to court documents

and people familiar with the

information exchange.

The Justice Department al-

leges Huawei misled banks

about its dealings in Iran.

HSBC cut most banking ties

with Huawei in 2017, The Wall

Street Journal previously re-

ported.

An HSBC executive said

some Chinese companies

opted not to do business after

the bank was attacked in state

media. In July, it was left off a

new panel setting China loan

rates and it is still waiting on

a license some rivals received

to underwrite corporate bonds

in the country.

People familiar with the

matter said HSBC has good

standing with officials. One

said Mr. Tucker was invited to

attend China’s 70th anniver-

sary parade Oct. 1 in Beijing

but couldn’t make it.

Mr. Quinn wasn’t even in the

running in the last CEO search,

shortly after Mr. Tucker joined

as chairman in 2017. Plain spo-

ken and practical, he has been

at the bank since 1987. He ini-

tially ran leasing businesses,

then went to Hong Kong in

2011 to head commercial bank-

ing in Asia and got the job

globally in 2015.

External CEO candidates

are division heads at banks

such as Citigroup, and former

and current bank CEOs, ac-

cording to people briefed on

the search.

“Finding an external candi-

date is very hard. They have to

understand the bank, Hong

Kong, and Hong Kong and

China,” said Ronit Ghose, an

analyst at Citigroup.

Mr. Quinn has said he never

expected to be in the job, in

part because he didn’t fit the

usual profile. Most of HSBC’s

CEOs rose through an elite, ca-

reer-long “international man-

agers” program.

Those include Mr. Flint, 51,

who rotated through posts in

Asia, the U.S. and Britain on a

regimented track to the C-

Suite. He was Mr. Tucker’s

pick for the job in 2017, but

their styles clashed almost im-

mediately.

Mr. Tucker, who had just

completed a successful run as

CEO at insurer AIA Group

Ltd., was largely in sync with

Mr. Flint on strategy but con-

sidered him too ponderous on

decisions, according to people

who worked with them.

Mr. Flint, in turn, found Mr.

Tucker to be imperious and

not open to being challenged,

according to a person familiar

with his thinking.

Mr. Quinn’s decision making

is “more instinctive,” said an

executive who served with him

on HSBC’s senior management

team.

His name was one of sev-

eral on a “hit by a bus” list to

replace Mr. Flint in unex-

pected circumstances. He was

chosen after Mr. Tucker told

Mr. Flint his career at the

bank was over at a weekly

catch-up meeting in late July

at HSBC’s private bank in Lon-

don.

Mr. Flint, asked not to re-

turn to his office at HSBC’s

Canary Wharf headquarters,

called in sick for a few days

while the bank negotiated the

terms of his departure and

prepared an announcement, a

person familiar with the mat-

ter said.

Mr. Quinn “brings pace, de-

cisiveness and ambition,” Mr.

Tucker said announcing the

appointment Aug. 5.

—Julie Steinberg

contributed to this article.

mercial bank are being re-
viewed to see if they are
worth keeping, people familiar
with the matter said.
Analysts anticipate more
retail disposals and scaling
back in investment-banking
activities. HSBC exited around
20 countries and dozens of
businesses this decade. But it
still has choices to make on al-
locating capital across its re-
maining 65 countries.
“‘The world’s local bank’
was a great marketing line but
it wasn’t a great corporate
strategy,” said Mike Fox, a
fund manager at Royal London
Asset Management holding
shares in the bank.
In private meetings with in-
vestors in recent weeks, Mr.
Quinn has assured them the
bank’s heart and soul is still in
Asia, its most profitable re-
gion, people familiar with his
comments said. HSBC makes
around one-third of its reve-

Continued from page B1

HSBC’s

Fill-In

CEO Tested

Share of revenue spent on

operating costs, 2014-18

*Excluding significant items

Sources: Factset (revenue on

operating costs); the company

(revenue by region)

HSBC

69.8%

Citigroup

60.7

JP Morgan

60.6

HSBC’s revenue

by region, 2018*

Asia

48.6%

Europe

30.2

North America

11.5

Latin America

5.2

Middle East and North Africa

4.5

BANKING & FINANCE

Point Advisors LP, which

didn’t file for bankruptcy.

In addition to the arbitra-

tion fight with those investors,

Highland has been sparring in

recent years with former em-

ployees Patrick Daugherty and

Josh Terry, who are each cred-

itors in the bankruptcy.

Highland lawyer Ira Kha-

rasch said he believed the firm

was solvent, notwithstanding

the claims from creditors, but

that a substantial portion of

its assets are highly illiquid.

Highland listed as its larg-

est debt in bankruptcy filings

the disputed arbitration award

in favor of investors in High-

land Crusader Fund, a hedge

fund that took heavy losses

during the financial crisis and

has been in liquidation since

then.

Marc Hankin, a lawyer for

Crusader Fund investors, told

Judge Christopher Sontchi

that Highland executives had

been found to have breached

fiduciary duties and made

false statements.

While Highland has brought

in outside advisers to steer

the firm through the chapter

11 process, Mr. Hankin said he

had concerns about the ar-

rangement because the chief

restructuring officer reports

to Highland co-founder Jim

Dondero. Mr. Hankin also said

he believed evidence would

show that Mr. Dondero owes

Highland tens of millions of

dollars.

Highland also listed as a

creditor Acis Capital Manage-

ment LP, a collateralized-loan-

obligation manager that was

formerly part of Highland and

is now owned by Mr. Terry.

After his termination from

Highland in 2016, Mr. Terry

won an $8 million award

against Acis and—worried its

assets were being transferred

to other Highland entities—

forced the CLO manager into

bankruptcy.

Acis emerged from bank-

ruptcy in February holding

what it said were legal claims

against Highland, Mr. Dondero

and the firm’s co-founder

Mark Okada.

Acis lawyer Rakhee Patel

said at Friday’s hearing that

the company would likely seek

the appointment of a chapter

11 trustee to take decision-

making authority in the bank-

ruptcy away from Highland

and Mr. Dondero.

“Mr. Dondero for far too

long has played a dangerous

litigation game and the chick-

ens have finally come home to

roost,” Ms. Patel said.

“The overwhelming body of

evidence,” she said, “is that

Mr. Dondero is not worthy of

placing the trust of the fate of

70-plus employees and hun-

dreds of millions of dollars of

creditors’ claims in his hands

to do as he wishes.”

A Highland spokesperson

said the concerns and allega-

tions expressed by creditors at

the hearing are without merit.

The firm’s goal “is to conduct

this reorganization in an or-

derly manner that creates

value for all constituents, and

we trust the court to direct

the process toward that out-

come,” the spokesperson said.

In addition, the spokesper-

son said other affiliated busi-

nesses have continued to oper-

ate without disruption and

that bankruptcy-court orders

entered Friday “extend that

same stability” to Highland.

Highland has subpoenaed

The Wall Street Journal re-

lated to the litigation between

the firm and Mr. Daugherty.

Dow Jones, the Journal’s par-

ent company, has challenged

the subpoena and the matter

is pending.

A New York state court last

year dismissed a defamation

lawsuit Highland filed against

Dow Jones, Journal reporter

Matt Wirz and Journal editor

Aaron Kuriloff over an article

in the Journal about the in-

vestment firm. Highland has

appealed the ruling.

Highland Capital Manage-
ment LP appeared for the first
time in bankruptcy court as
creditors’ lawyers questioned
the fund manager’s corporate
governance and previewed a
potential battle over control of
the restructuring process.
The Dallas-based firm ap-
peared Friday in the U.S.
Bankruptcy Court in Wilming-
ton, Del., after seeking court
protection from investors in a
failed Highland hedge fund
that were trying to enforce a
$189 million arbitration
award.
The fund manager is one of
several investment units under
the same ownership, including
Highland Capital Management
Fund Advisors LP and Nex-

BYANDREWSCURRIA

Fund Manager, Creditors Clash in Court

The bank makes around one-third of its revenue in Hong Kong.

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