WSJ : Switzerland Strives to Be Global Leader in Opening Skies for Drones

Switzerland Strives to Be Global Leader in Opening Skies for Drones
Swiss air-traffic control organization and local businesses team up to dramatically expand unmanned aircraft flights

ZURICH—Switzerland is working on pioneering ways to handle booming drone traffic aimed at allowing unmanned aircraft to quickly operate in much more of the nation’s airspace than approaches being pursued in other countries.

Backed by a fast-growing local drone industry and assisted by startup U.S. drone-services provider AirMap, Swiss authorities are taking concrete steps to move toward integrating manned and unmanned aircraft that can fly and safely coexist in the same cramped airspace.

The eventual goal envisions seamless integration to ensure controllers will give drone operators instructions in real-time to avoid hazards and prevent midair collisions, though no firm timeline has been established.

The lessons from the initiative are expected to promote similar efforts across Europe, on the other side of the Atlantic and parts of Asia, areas where regulators are on a slower track to expand drone uses. The Swiss government on Tuesday announced an interim move to facilitate “information exchange and interaction between airspace authorities and drone operators.” Controllers at some sites will now be able to track some drones on a dashboard next to their existing radar screens, and drone operators, in turn, will have access to automated flight-plan approvals and updated data about nearby helicopters and piloted planes. But at this point, controllers have no responsibility to intervene.

Skyguide, the air-traffic organization that is majority-controlled by the Swiss government, is bucking the tradition of strictly segregating drones in reserved airspace. It also has been prodding controllers to help transition to a unified traffic-control network and continues to spur development of advanced, cloud-based applications intended to encourage entrepreneurs and make Swiss skies a mecca for unmanned aerial vehicles.

In the close confines of landlocked Switzerland, traditional aviation “had to learn not just to live together, but to work together” with remotely piloted vehicles, said Klaus Meier, Skyguide’s chief technology officer, in a June interview.

But before that can become commonplace, Swiss authorities have to overcome technical challenges posed by mountain peaks, deep valleys and densely populated urban areas crisscrossed by helicopters.

Equally important, local law-enforcement agencies need to reassure controllers they won’t be held criminally liable for errors carrying out expanded responsibilities separating traditional aircraft from future generations of unmanned aerial vehicles. Over the years, some dozen controllers have been prosecuted or investigated by local law-enforcement officials across Switzerland for mistakes—even though the slip-ups didn’t result in accidents.

In many other countries, the spread of drone technology has prompted talk about long-term integration with piloted aircraft. But in Switzerland, drone backers are convinced that its imperative to implement changes sooner rather than later due to the competing challenges of the country’s topography and the popularity of Zurich Airport as an international hub. The current plans are intended to mark the path toward air taxis, large cargo drones and in decades to come, perhaps commercial aircraft directed from the ground.

AirMap, a closely held company based in Santa Monica, Calif., is working to help many countries from the U.S. to the Czech Republic expand drone flights. But Ben Marcus, the company’s co-founder and chairman, said “Switzerland is really on the leading edge,” pointing to earlier tests of mobile applications for flight authorizations by 200 drone operators around the Lugano and Geneva airports.

But not everyone agrees. “We often hear a lot of talk about one (country) is ahead, one is behind,” said Jay Merkle, the head of the U.S. Federal Aviation Administration’s drone integration office. The reality is the sharing of information and tips across national boundaries, said Mr. Merkle on the sidelines of an international air-safety conference in Cologne in June.

When it comes to urban air mobility in future years, “some of the early assumptions are going to go away,” Ricardo Domingo, head of the FAA’s flight standards office, said at the same conference.

Acceleration of Switzerland’s drone-friendly policies comes in the wake of European air-safety regulators releasing long-awaited rules in May contemplating new air-traffic solutions

According to Mr. Meier, in Switzerland “there is political support from the government” and encouragement from university spin offs for ambitious drone-friendly policies. Still, it’s expected to take until the end of the year to expand the flight-information network to Zurich’s complex airspace.

WSJ : The Fall of Barneys Burns a Hedge-Fund Star

The Fall of Barneys Burns a Hedge-Fund Star
Richard Perry controlled the department store during broader retail decline

Some billionaire hedge-fund managers buy sports teams. Richard Perry snapped up one of New York’s most influential luxury department-store chains.

Mr. Perry’s passion project—Barneys New York Inc.—filed for chapter 11 bankruptcy protection Tuesday with plans to close 15 of its 22 stores and with new financing that gives it time to find a buyer. Barneys’ troubles reflect the litany of woes hurting retailers across the U.S.: The company faced a sky-high rent increase and ran into difficulty navigating the rise of e-commerce.

The unraveling of Barneys is a blow for Mr. Perry, who developed a personal interest in the fortunes of the nearly century-old company known for taking chances on little-known designers. Mr. Perry’s hedge fund gained control in 2012 by swapping its debt for equity. All in, Perry Capital invested less than $300 million, a fraction of what it once managed.

Mr. Perry shuttered his fund in 2016, though it continues to hold several less liquid assets, including the Barneys stake.

“This was his passion. This was his New York Yankees,” a person close to Mr. Perry said of Barneys. “He loved that company.”

Mr. Perry’s spokesman, Richard Edelman, described Barneys as “a business investment for Richard,” not one driven by personal interest. “As Richard has done over the course of his career, he made the investment after significant diligence and determining it was a smart investment to make,” Mr. Edelman said.

As Barneys chairman, Mr. Perry closed unprofitable stores and reduced shipping and return costs, said another person close to him. But Mr. Perry was also resistant to input and made significant missteps that contributed to the company’s deterioration, according to several people currently or formerly involved with Barneys. They said he overemphasized the importance of physical stores, was slow to recognize the importance of e-commerce, and was unable to stave off a steep rent increase.

Mr. Edelman said Mr. Perry was deferential to the management team but, as board chairman, took responsibility for strategic missteps.

Barneys Chief Executive Daniella Vitale said Mr. Perry “has pushed me to take risks but also supported me when those risks did not result in reward.”

The 64-year-old Mr. Perry has long been one of the most prominent investors on Wall Street. He founded Perry Capital in 1988 with Paul Leff, a former portfolio manager at Harvard Management Co., after training at Goldman Sachs Group Inc. ’s famed risk-arbitrage desk. The multistrategy hedge fund hit a peak of $15 billion in assets under management in 2007. A big bet against the housing market paid off, as did an early position in the preferred shares of mortgage giants Fannie Mae and Freddie Mac .

His history with Barneys began in 2009, when Perry Capital snapped up $200 million of Barneys’ bank debt for about 60 cents on the dollar, said people familiar with the investment. Perry in 2012 converted the debt to equity to assume control of Barneys and put in another roughly $125 million.

Barneys represented a combination of Mr. Perry’s personal and professional interests. He has spoken affectionately of shopping at Barneys, where he bought his first suit in the 1970s. More recently, he has sported fashionable knit ties and cropped pants.

Soon after his hedge fund assumed control in May 2012, Mr. Perry called a meeting of Barneys’ senior management on a Sunday night at his penthouse apartment on the far east side of Manhattan. His wife, Lisa Perry, attended the meeting and spoke about Barneys, said people familiar with the matter. Mr. Edelman said Ms. Perry’s involvement made sense because she was a vendor to Barneys.

Barneys first began featuring Ms. Perry’s clothing, which was also carried at stores including Bergdorf Goodman and Bloomingdale’s, in 2009, when Perry Capital was a creditor, said people familiar with the matter. In 2016, Barneys licensed her brand as part of an effort to draw traffic and generate higher margins with exclusive designs.

Mr. Edelman said that Barneys didn’t pay anything to license Ms. Perry’s brand and that she is paid a design fee only when her line is profitable. Ms. Vitale said in a statement it was her idea to license Ms. Perry’s brand and that it has one of the highest gross margins among Barneys’ in-house brands.

Barneys expanded the Perrys’ already high-profile social circle, which included Jay-Z and Hillary Clinton. By representing Barneys, Mr. Perry became a familiar figure at fashion shows and friendly with Justin Bieber and other celebrities, according to people familiar with the matter. Ms. Perry regularly posts about Barneys on Instagram.

Barneys spokeswoman Tomm Miller said the Perrys attended store events to support staffers. Mr. Edelman said any socializing Mr. Perry did with celebrities was to benefit Barneys.

Mr. Perry’s interest in Barneys was profitable for years before it soured. Former Perry Capital employees said that Barneys was the rare investment Mr. Perry provided updates about and that he spent a significant amount of time on it.

In 2016, Mr. Perry hired Goldman to try to sell part or all of Barneys, according to people familiar with the matter. Though Amazon.com Inc., TPG Capital and Swiss luxury conglomerate Cie. Financière Richemont SA engaged, Mr. Perry didn’t view any offers as serious, one of the people said.

Mr. Perry closed his hedge fund in September 2016, citing “industry and market headwinds.” Its average annualized return was 10.7% from inception through August 2016, according to an investor document.

Perry has returned about 90% of clients’ money and is working on unwinding the remaining investments.

FT : Commerzbank lifts provisions for bad loans amid ‘worsening economy’

Commerzbank lifts provisions for bad loans amid ‘worsening economy’
German lender says it may miss 2019 profit target

Commerzbank warned its 2019 profit target was “significantly more ambitious” after the lender boosted risk provisions for non-performing loans and said it was facing “worsening” economic conditions.

Germany’s second-largest listed lender, which was in failed merger talks with larger rival Deutsche Bank earlier this year, previously told investors that it expected a “slight year-on-year increase” in net profit, which in 2018 stood at €865m. Analysts on average were already expecting a 0.4 per cent decrease prior to Wednesday’s release.

Shares in Commerzbank have fallen 35 per cent over the past 12 months.

Commerzbank’s provisions for loan losses more than doubled over the second quarter to €178m owing to “single cases” of loans turning sour, the bank said, without providing additional details.

Analysts in the past have warned that Commerzbank might be hit harder than rivals from non-performing loans in an economic downturn, as it had aggressively sought to expand its lending to companies.

On Wednesday, the lender stressed that the overall quality of its lending book was good, with just 0.8 per cent of loans being non-performing in the first half, compared with 0.9 per cent a year earlier. It also said that it was on track for meeting its previous guidance of €550m risk provisions for the full year, as the tally after six months stands at half that value.

The lender’s second-quarter profits were also hit by an adverse €142m swing in profits caused by the revaluation of assets held by its corporate client units. This was caused by legacy portfolios as well as hedging and portfolio management activities.

Operating profit dropped 26 per cent in the second quarter to €298m, Commerzbank said. Commerzbank’s common tier-one equity ratio — a key indicator of balance sheet strength — in the second quarter stood at 12.9 per cent of risk-weighted assets, 20 basis points above both analyst expectations and the first quarter of 2019.

The lender’s overall revenue in the second quarter fell by 2.2 per cent to €2.2bn and was slightly higher than expected by analysts. Operating expenses came down by 3.4 per cent to €1.6bn, in line with expectations.

>>> US After Hours Summary: GH +24%, MTCH +19%



After Hours Summary: GH +24%, MTCH +19%, NVTA / SEDG +18%, WW +16%, NEWR -19%, KAR -13.5%, PLNT -6% among notable earnings/guidance movers

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MR +28.7%, GH +23.7%, MTCH +18.7%, NVTA +18.4%, SEDG +17.6%, WW +15.7%, FLXN +12.7%, GWPH +11.4%, PE +9.7%, LC +9.6%, SAIL +7.7%, HUBS +7.2%, WK +5.7% (light volume), MCHP +4.6%, HTZ +4.4%, AMN +3%

Companies trading higher in after hours in reaction to news: IAC +11.9% (following MTCH results - owns 80% of the company), IONS +2.4% (Akcea Therapeutics [AKCA] and Ionis Pharma announce that top-line results from the BROADEN study met the primary endpoint)

Solar related names lifting following SolarEdge (SEDG) results: etf TAN +3.2%, CSIQ +2%, SPWR +1.9%, RUN +1.8%, FSLR +1.7%, ENPH +1.3%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ZAGG -20% (also to consider strategic alternatives and updates restructuring plans), NEWR -18.8%, PBPB -16.7%, OAS -15.7%, FTR -15.4%, KAR -13.5%, PEN -11.8%, SSTI -10.7%, BECN -9.7%, AXGN -9% (light volume), SUPN -8.7%, PLNT -6.4%, VOYA -5.6% (light volume), ADT -5.4%, ENLC -3.7% (also Executive Chairman to re-assume CEO job effective August 8), DIS -3.3%, MAXR -3.1%, SWN -2.7%, LTHM -2.5%, RRR -1.9%, WYNN -1.2%

Companies trading lower in after hours in reaction to news: DPW -25.8% (established $5.5 mln "at-the-market" equity offering program), IRWD -4.1% (proposes offering of $330 mln of convertible senior notes), AYX -3.5% (proposes private offering of $350 mln of Convertible Senior Notes due 2024 and $350.0 million aggregate principal amount of Convertible Senior Notes due 2026), ALLK -2.6% (following two-day ~50 point surge higher), EGO -2.6% (filed $750 mln preliminary short form base shelf prospectus), SILK -1.9% (proposed underwritten public offering of 3,500,000 shares of its common stock), WAB -1.4% (ticking lower - announced the launch secondary offering of 20,485,156 shares by General Electric Company as the sole selling stockholder), CDAY -1.2% (announces secondary public offering of 8.0 mln shares of common stock by selling stockholders),

>>> China Global Times Editor-in-chief Hu Xijin tweets: China won't yield to Was

China Global Times Editor-in-chief Hu Xijin tweets: China won't yield to Washington's hegemony. We're prepared for new US tariffs.
- Hu tweets: "This kind of soft tone by Trump administration is tailor made for US stock markets. Their lies have become bubbles flooding the US stock markets. Whether or not there will be negotiations, China won't yield to Washington's hegemony. We're prepared for new US tariffs."

>>> Fed's Bullard (dove, voter, dissenter): further rate action may be desirable

Fed's Bullard (dove, voter, dissenter): further rate action may be desirable but economy is still adjusting to Fed's shift as of early this year from raising rates to lowering them
- Reiterates Fed can't react to day-to-day trade negotiations
- Trade uncertainty is likely to linger for years to come; they are chilling global investment and growth
- Not seeing yield curve inversion intensifying so far
- Inflation pressures remain muted

FT : Klarna becomes most valuable fintech with $5.5bn valuation

Klarna becomes most valuable fintech with $5.5bn valuation
Swedish payments company raises new money ahead of IPO

Klarna has become the largest private fintech start-up in Europe after a new funding round valued the Swedish payments group at $5.5bn ahead of a potential stock market flotation. 

The Swedish “buy now and pay later” company raised $460m in equity from investors including Silicon Valley venture capital company Dragoneer, the Commonwealth Bank of Australia, and funds managed by the world’s largest asset management group BlackRock. 

Klarna’s valuation has risen from $2.5bn at the start of this year to $3.5bn in April when existing shareholders such as Hennes & Mauritz, Sequoia Capital and Permira invested fresh equity to today’s post-money valuation of $5.5bn, ranking it as the eighth most valuable private fintech globally. 

Sebastian Siemiatkowski, Klarna’s chief executive, said that the Swedish group was edging closer to an IPO. 

“At this point of time, it’s more likely than it has been previously. I definitely think it will happen. But it’s not like there’s a formal decision. Right now the whole company is just focused on making sure we are growing fast,” he added. 

Asked if Klarna is ready for an IPO, he replied: “In many ways, we have most of the things in place that we need. It’s more of a question of timing and focus. We have such high growth in the US. An IPO is a lot of work.”

Klarna is the latest in a series of Swedish tech success stories that include the music streaming company Spotify to gaming groups King and Mojang. Stockholm has produced more billion-dollar “unicorn” companies than any other region behind Silicon Valley. 

Founded in 2005 by a trio of business school friends, Klarna took the idea of customers only paying when they received an invoice and applied it to online shopping.

It now processes $29bn of transactions for merchants such as Asos and Ikea, earning fees from them as well as interest from customers who pay late. Last year, it made an operating profit of $19m on revenues of $627m. 

Mr Siemiatkowski said the new money would help it expand in the US, where it is growing at the rate of 6m users ayear. “We have just seen massive traction in the US market. We have super high growth, both among merchants and consumers. This is a massive market opportunity.” 

Klarna was one of the first large European fintechs to gain a banking licence in 2017 and has started offering its own payment card. Its shareholders are as diverse as Visa, fashion group Bestseller, and rapper Snoop Dogg. 

As part of the fundraising announced on Tuesday, Klarna will also enter Australia and New Zealand in partnership with CBA. “Retail is becoming global. Even the smallest companies are selling to multiple geographies. The more markets we cover the better,” said Mr Siemiatkowski. 

UK-listed broker Numis advised Klarna on the fundraising.