HSBC: how simple becomes complicated

(Very) Cheap fees to start: Management fees on private equity buyout funds have fallen to their lowest levels since records began in 2005 as fund managers fight to attract investors in a tough fundraising environment.

In today’s newsletter:

• HSBC chief unveils restructuring plan

• The troubles at EY drag on

• Mega satellite TV merger vs. bondholders

The complex shake-up at HSBC

If HSBC’s new chief executive Georges Elhedery is trying to revive the well-worn joke that the bank’s name stands for “How Simple Becomes Complicated”, he’s going about it the right way.

Within weeks of taking the top job at Europe’s biggest bank, Elhedery has announced a wide-ranging restructuring that will take it from three divisions to four and introduce geographical distinctions between what it calls “eastern” and “western” markets.

The UK ringfenced bank will be one division, and the Hong Kong bank another.

Then there will be “corporate and institutional banking”, including commercial banking outside the UK and Hong Kong as well as its current “global banking and markets” business that houses its markets unit and investment bank, among other things.

(We wrote this month about the planned merger of those two units.)

The fourth division will be “international wealth and premier banking”. That includes its mass-affluent “premier banking” businesses outside Hong Kong and the UK, its global private bank and what it is now (displeasingly) calling “wealth manufacturing” businesses, aka asset management and insurance.

If you’re still following, we’ve got one last bit to explain. Within “corporate and institutional banking” and “international wealth and premier banking”, business will be under either “western markets” or “eastern markets” — with the Middle East falling into the latter.

The upheaval will enable Elhedery to reduce the bank’s top layer of management from 18 to 12 people. But it’s not yet clear how many other job cuts there will be.

The new CEO knows he needs to cut costs at the bank, especially because falling interest rates will hit its net interest income, a huge part of its profitability.

Still, undergoing a complicated restructuring of a bank behemoth is a bold way to begin your time in charge. And at a time of Sino-US tension, there’s something symbolic about the new east/west labels from a bank that has always been the face of globalisation.

EY’s corporate headaches

Ever juggled two conference calls at the same time, or run webinars in the background while checking email?

That’s all in a day’s work for many corporate employees. But multitasking has its limits, as dozens of staff at EY just learned the hard way.

The Big Four firm fired employees who attended more than one online training class at a time during the “EY Ignite Learning Week” in May, where staff work towards the continuing professional education credits the firm demands.

Several fired employees told the FT they were just trying to take full advantage of useful sessions that ranged from “How strong is your digital brand in the marketplace?” to “Conversing with AI, one prompt at a time”.

But the firm said staff have an obligation to complete learning activities with integrity, and juggling more than one session breached its code of conduct.

The firings have sparked a fierce internal debate, playing out on the employee messaging service Fishbowl, about whether the fired staff behaved unethically or EY overreacted.

More than a few employees claimed the firm was trying to do two things at once: send a message about the importance of these courses while also saving money by pushing people out without severance.

Why such cynicism, you might ask? Times continue to be tough, 18 months after EY abandoned an expensive effort to spin off its consulting business, a project that would have freed its consultants from having to do a tonne of this compliance stuff in the first place.

Last week, the company reported bleak financial results. EY’s revenue growth was the weakest in 14 years, and its headcount has also fallen for the first time in 14 years, as it shed poor performers and limited hiring.

Despite the tough backdrop, the firm’s leadership is cheery this week in Orlando, Florida — presenting an upbeat message at the company’s annual meeting of US partners.

Bondholders threaten to block $23bn effort to build telecoms giant

Distressed debt investing in the US can be notoriously vicious. Hedge funds regularly backstab one another if it means they’ll get a better deal. In fact, some say they have a fiduciary duty to do so.

But those fights, sometimes called “creditor-on-creditor violence”, got so bad in recent years that value was often destroyed for everyone involved. Legal fees piled up, and so did the headaches.

Out of those fights cropped up a friendlier era, one where so-called co-operation agreements — contracts among debt holders where they agree to negotiate with the company as a collective — have proliferated.

We’re now seeing the first major test of how those agreements hold up when negotiations are tense, through a $23bn bid to combine the US’s two biggest satellite TV providers: Dish and DirecTV.

The deal is structured so that DirecTV would pay a nominal $1 for Dish, but would also assume the majority of its debt, although with a $1.6bn discount.

Dish bondholders, which had previously formed one of the biggest co-operation groups ever, have to approve the deal. Instead, they want to narrow that discount to about $300mn, according to letters seen by the FT.

DirecTV snapped back in their own letter by pointing out that some bondholders have credit default swaps, which would give them a windfall payout should Dish be forced into bankruptcy following a cancelled merger.

A debt exchange at this scale was never expected to be easy. “I think of it as landing two or three 747s on the same runway at the same time without crashing,” said Dish parent company chief executive Hamid Akhavan on a call with investors shortly after the merger was announced.

All the while, the clock’s ticking. The offer expires on October 29.

“We’ll let the bondholders decide for themselves . . . we are offering something that, in our view, is highly attractive,” Akhavan added. “I hope they recognise it and see it.”

Job moves

• Peter Estlin has joined the board of Revolut UK, the fintech’s entity that was granted a conditional banking licence in July. He is chair of British listed retail bank Vanquis and also sits on the supervisory board at Rothschild.

• AGL Credit Management has hired Kassem Shafi for the newly created role of head of capital formation and strategic initiatives. He most recently worked at Barclays.

• ForgePoint Capital is opening an office in London to oversee its European investments. As part of the opening, the firm has hired Damien Henault as a managing director, Michael Cortez as a partner, and Jaime Goyarrola as a chief financial officer.

Smart reads

Debt’s allure It can feel like there are endless asset classes to invest in nowadays, Howard Marks writes for the FT. Yet he argues there are in fact only two real classes: ownership and debt.

Health and Safety Rivian has racked up more safety violations deemed “serious” than any other carmaker since the start of last year, Bloomberg reports. The money-losing company was slow to install procedures, equipment and training to keep employees safe.

Rich Republicans Donald Trump has spent the past several months courting the country’s wealthiest donors at fundraisers hosted in their opulent homes, the New Yorker writes. What do they expect in return?

News round-up

Former Abercrombie & Fitch CEO Mike Jeffries charged with sex trafficking (FT)

Starboard accuses Pfizer management of $20bn value destruction (FT)

Starbucks scraps 2025 guidance after fall in sales and earnings (FT)

Water regulator signals further increase to bills in England (FT)

Senior VW executive deported from China (FT)

Goldman Sachs faces CFPB fine over credit-card business (WSJ)

Rudy Giuliani must turn over NYC apartment and watches in defamation case (FT)

McDonald’s shares drop as Quarter Pounders tied to fatal US E. coli outbreak (FT)