Financial News

October 30, 2008

GM seeks $10 billion in aid for merger: sources

Filed under: finance — Tags: , , — Insurancent @ 2:23 am

General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) has asked the U.S. government for roughly $10 billion in an unprecedented rescue package to support its acquisition of Chrysler LLC from Cerberus Capital Management CBS.UL, sources familiar with the talks said.

The government funding would include roughly $3 billion in exchange for preferred stock in a merged automaker, according to one of the sources, who was not authorized to discuss the matter publicly.

The U.S. Treasury Department is considering a request for direct aid to facilitate the merger and a decision could come this week, sources familiar with the still-developing government response said on Monday.

The request for federal aid is being led by GM. The automaker’s chief executive, Rick Wagoner, was in Washington in recent days to lobby administration officials.

Cerberus has not been involved in any of the lobbying efforts, a source familiar with the matter said.

GM has been in talks with Cerberus about buying Chrysler since last month but the discussions have been snagged by difficulty in securing investment or financing at a time when credit is tight and global auto sales are in rapid retreat, others close to the talks have said.

A decision by the Bush administration to provide the government’s first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 has been widely seen as the merger’s best chance for success.

“The automakers are facing a maelstrom and that’s why I think an unprecedented government infusion could happen,” said Efraim Levy, an automotive equity analyst with S&P one hour cash.

An injection of $3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top U.S. automaker.

It would also give U.S. taxpayers a large stake in the turnaround of a struggling auto industry that employs more than 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.

Analysts perceive GM, Chrysler and rival Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) as driven to the brink of failure by a combination of management missteps, slowing global growth and problems in credit markets.

Now, in addition to taking a stake in what would be the world’s largest automaker by volume, the U.S. government is also being asked to provide support by taking over some $3 billion in pension obligations, the first source said.

The final component of the proposed support would be a credit line that could include U.S. government purchases of commercial paper to relieve short-term pressure on liquidity, the person said.

GM could not immediately be reached for comment. Cerberus and Chrysler had no comment.

TOO BIG TO FAIL? 

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October 28, 2008

PotashCorp profit hits record $1.24B

Filed under: management — Tags: , , — Insurancent @ 2:16 pm

SASKATOON–Potash Corp. of Saskatchewan Inc. has reaped third-quarter earnings of $1.24 billion – five times as much as a year ago and exceeding the $1.1 billion it earned in all of 2007, which was its best year to date.

The July-September profit of $3.93 per share for the world's largest fertilizer producer compared with $243.1 million or 75 cents per share in the third quarter of last year.

Year-to-date earnings total $2.7 billion, "fuelled by significantly higher prices for all our potash, nitrogen and phosphate products," the company stated.

"Despite the recent onset of a global economic downturn, the need for food is not abating," commented PotashCorp CEO Bill Doyle.

"That enabled us to utilize our unique strengths in each nutrient to achieve the best quarterly performance in our history, producing record cash flow and gross margin while also preparing our company for the expected growth in potash demand."

PotashCorp observed that the bloom is off the grain and oilseed boom amid a broad decline in commodity prices.

"By the end of the quarter, we believe lower crop prices no longer reflected the strong underlying global grain fundamentals, and fears about access to credit for agricultural buyers had a negative effect on the psychology of the sector as a whole."

As a result of "short-term uncertainty," PotashCorp said its full-year net income per share now is expected to be at the low end of its previous guidance range of $12 to $13 per share http://payday-z.com.

For the fourth quarter and next year, previously announced potash price increases are taking hold and potash fundamentals are expected to remain tight.

"Longer-term, over the next five to seven years we expect demand growth to meet or exceed the availability of new supply."

Meanwhile, "nitrogen products face the greatest immediate-term challenge from temporary deferrals of purchases," and there is downward pressure on phosphate prices, offset by lower raw-material costs and ocean freight rates.

Capital expenditures of $336.2 million were up 132 per cent from last year's third quarter, "as continued strong cash flow was reinvested in potash debottlenecking and expansion projects at our Lanigan, Patience Lake, Cory, New Brunswick and Rocanville potash facilities, and load-out expansions at Rocanville and Allan."

Full-year capital expenditures are projected at $1.2 billion.

"Although we are not immune to the global financial crisis, we believe we are uniquely sheltered by the immutable long-term need for higher global food production and the key role that potash plays in helping meet this demand," Doyle stated.

"Despite the economic turmoil, governments and farmers cannot sit on the sidelines while people wait for food."

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October 26, 2008

Diving dollar, shares slam Japan

Filed under: management — Tags: , — Insurancent @ 4:07 pm

TOKYO–Export-centered Japan got slammed with a slew of bad news Friday as the dollar nose-dived to a 13-year low against the yen, sending Tokyo share prices plummeting to a five-year low.

"The situation is a meltdown, and investors' faith is getting annihilated," said Yasunari Ueno, economist at Mizuho Securities Co. in Tokyo.

The U.S. dollar sank temporarily to 94 yen levels – the lowest since August 1995 – on growing worries about a recession in the U.S. economy. Speculation that the U.S. Federal Reserve may slash interest rates again intensified dollar-selling.

Just a day earlier, Sony Corp., which makes about 80 per cent of its sales overseas, had radically slashed its fiscal year forecasts. Sony blamed the yen's rise against the dollar and euro, but also faulted expected slowing consumer demand in the U.S.

But gyrations on the foreign exchange that followed outpaced even Sony's dismal scenario.

Sony, the maker of the Walkman portable music player and PlayStation 3 game console, had initially counted on the dollar trading at about 105 yen, but it changed that expectation to 100 yen, the company said Thursday.

By late Friday, the dollar was trading at 94.94 yen.

Sony shares dropped 14.1 per cent to 1,972 yen ($20), leading a wider 9.6 per cent plunge in the benchmark Nikkei 225 stock average.

Expectations are growing that consumers in the U.S. and Europe are likely to tighten purse strings and curtail shopping for flat-panel TVs, digital cameras and other gadgets amid looming financial uncertainty.

And the same tale of the weak dollar chipping away at Japanese giant exporters' profits was likely to be repeated over and over on the Tokyo Stock Exchange, analysts said.

"The Japanese economy is so clearly dependent on the performance of exporting companies. It's so clear when they get hit, there is only gloom and doom," said Yasuhide Yajima, senior economist at NLI Research Institute in Tokyo.

Not only are companies getting hit by the unfavorable exchange rate, exports themselves are falling – not only to the U free credit report .com.S. and Europe, crippled by the financial crisis, but also emerging markets, including once booming China, said Yajima.

And the negative spiral isn't likely to get reversed anytime soon, according to analysts.

A strong yen could have been a boon for some companies a few months ago when oil prices were surging, but not any more – now that crude was coming down in price. Oil prices were steady at $67 a barrel Friday, about half of what it had reached earlier this year.

The bad news could get painfully worse when Japanese companies release second fiscal quarter earnings in the next few weeks.

It's unclear whether major Japanese companies will declare bankruptcy or be forced to laying off chunks of their work force like their American counterparts. Layoffs are relatively rare at major Japanese companies, which tend to boast a corporate culture of lifetime employment and loyalty.

Symbolic of the economic blues, a collapsed hotel in downtown Tokyo has been drawing media attention, partly because of its financial ties to a Japan affiliate of the now collapsed Lehman Brothers.

The hotel was put up for sale earlier this week, having defaulted under the weight of its bad debt. But its workers are refusing to leave – and still working.

Despite orders to close shop, about half of its 130-strong work force are keeping 20 of its 50 hotel rooms filled with guests, using union and workers' money to buy food supplies for restaurants.

With times being so tough, "salarymen" are rallying to their support during their lunch breaks, visiting the hotel whose walls are plastered with protest signs, said union leader Hideo Watanabe.

"Our restaurants are bustling with business," he said.

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October 24, 2008

New drink promises to relax you

Filed under: term — Tags: , , — Insurancent @ 9:45 pm

Convenience store shelves have become crowded in recent years with a lineup of supercharged, super-caffeinated energy drinks. Red Bull is now flanked by dozens of rivals — Full Throttle, Monster, Rip It and St. Louis-brewed Pimp Juice, among them — each promising to boost, lift, power or otherwise skyrocket your day.

But amid the high-amp froth, a new product has entered the carbonated fray: An "anti-energy" drink, called "drank," that claims to be the first "extreme relaxation" beverage.

"There are all these energy drinks, which are great at eight in the morning," said Preston Shults, distributor of drank in the St. Louis area, where it hit stores in August. "But at the end of the day, you want something to relax you."

While overall sales of carbonated sodas in the U.S. have fallen recently, energy drink sales continue to climb, reaching $3.4 billion in 2006. Last year, sales surged to $6.2 billion of the $72 billion soda market, according to Beverage Digest.

Now there’s an antidote to all that energy, though it’s unclear whether drank represents the start of a new carbonated soda boom. Drank not only must still win over consumers in a crowded market, it also will have to overcome the skepticism about its ingredients and marketing.

In a purple can, featuring the slogan "slow your roll" and an image suggestive of a cough syrup bottle, drank contains melatonin, valerian root and rose hips — a combination, designed to calm and mellow anyone who sips it, according to its creator. A warning label says not to drink more than two cans in 24 hours.

"We’re going to take a clear look at it," said Cara Smith of the Illinois attorney general’s office. "The fact that they give a warning is one of the things that intrigues me. Is that a marketing tool, or is that a legitimate warning?"

The Illinois attorney general’s office has demanded that the makers of Blow, an energy powder packaged like cocaine, and Cocaine, an energy drink, be removed from stores because their packaging and marketing strategies attempted to

capitalize on a connection with the real thing.

St. Louis is one of the first markets for drank, which launched earlier this year and is now in at least 12 cities around the country, mostly in the South. The South is also the birthplace of the underground beverage known as "purple drank," a concoction of codeine-laced prescription cough syrup and fruity soda, with the occasional Jolly Rancher as garnish. "Purple drank," sometimes called "syrup" or "lean," became popular in the hip-hop scene several years ago, particularly in the Houston area, where rap mixer DJ Screw celebrated syrup drinks in his music. DJ Screw, who pioneered a slow rap style that became known as "screw" music, eventually died of a codeine overdose, authorities said.

"Basically we became aware of it by the rap songs and the word on the street," said Mark Ong, a narcotics investigator with the Houston Police Department. "They’d just say, ‘Hey, got me a drank.’ Then we learned it was codeine. It’s rampant here in Houston guaranteed cash advance. Big time."

The association with the illicit beverage — the name, the slogan, a warning on in-store sales material saying the product may cause leaning — is not incidental, said Peter Bianchi, drank’s creator and CEO of Houston-based Innovative Beverage Group. "I wanted to catch people’s attention with something that was hip, new and now," he said.

But, Bianchi added, most people have never heard of "purple drank" and he stresses that it’s a healthy alternative for people who want to relax without alcohol.

Bianchi said he developed drank after years of experimentation, tinkering with nonalcoholic ingredients to help him relax. "I did this out of a personal quest," he said. "I was always a hyperactive child."

He hit on melatonin, a hormone associated with sleep, and valerian root, an herbal root that’s said to have calming properties. "With this," he said, "you’re still able to have your clarity of mind."

The promise that drank will "slow your roll" hasn’t been confirmed by the Food and Drug Administration because, as with other products that fall into the FDA’s conventional foods category, no testing is required. (Energy drinks are marketed as either conventional foods or dietary supplements. But in either case, they require no testing.)

"The producer bears the onus of ensuring that they are bringing a safe product to the market," said Siobhan DeLancey of the FDA.

In the case of drank, the ingredients are all "generally regarded as safe" by the government. The warning, saying consumers should restrict consumption to two cans in 24 hours, isn’t required.

So far, stores in the St. Louis area say the product is doing well, despite some initial confusion.

"I was talking to a clerk, and I asked how it was going," Shults said. "And he said one customer grabbed (a can) quickly, and ended up falling asleep at work, and came back in and complained. The clerk said: No, it did what it was supposed to."

At Joel’s Shell on Arsenal Street in St. Louis, the cans go for $2.39. "We’re going through five to eight cases a week," said manager, Tim Miller. "That’s a lot."

At the Hampton Express Market on Watson Road, sales also have been brisk. Chad Hearring, a carpenter from St. Louis, has gotten into a nightly pattern, picking up a drank there after work. "It’s the opposite of an energy drink," Hearring said. "It just kind of relaxes my muscles, my nerves, and makes it easier to go to sleep."

While none of drank’s ingredients is inherently harmful, nutritionists say consumers should be careful. "I’m a little concerned with the marketing and where they’re going with it," said Annie Neuendorf, a nutritionist at Northwestern Memorial Hospital in Chicago. "But in general, I feel if the consumer is educated, (he) should be okay."

ggustin@post-dispatch.com | 314-340-8195

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October 23, 2008

Germany to approve bank package, China growth slows

Filed under: business — Tags: , — Insurancent @ 12:34 am

Germany was set to approve a rescue package for banks on Monday and top Dutch lender ING sought an injection of government funds, but in a reminder that no country is immune from the global crisis, China reported weaker-than-expected growth.

South Korea’s $130 billion financial bailout announced this weekend gave its embattled currency a lift on Monday, and stocks in Tokyo and elsewhere in Asia gained in a rebound from the sharp sell-down of recent weeks.

Big European stock markets were expected by bookmakers to open roughly 1 percent higher.

Governments around the world have pledged $3.3 trillion to remedy the worst financial crisis in decades, but volatile markets are also focused on the damage to the broader economy as signs of a potentially deep slowdown abound.

Monday’s rebound in Asian stocks was seen as fragile because while governments are dealing with the financial storm unleashed in the past month, they may need to do much more to shore up their economies 24 hour payday advances.

“The gains probably won’t last. The deterioration of the real economy is happening much faster than expected. We need comprehensive counter-measures, rather than just those only for the financial system,” said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.

Bank of Japan Governor Masaaki Shirakawa said that growth in the world’s second-biggest economy is likely to remain sluggish as countries elsewhere stutter.

“Tensions are heightening in global financial markets and downside risks exist for the world economy,” he said in a speech. 

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October 21, 2008

BOJ Cuts Economic View in All Regions for First Time

Filed under: news — Tags: , , — Insurancent @ 2:55 pm

The Bank of Japan cut its economic assessment in all of the country's nine regions for the first time, citing slowing exports and weak household spending.

“Economic growth had been sluggish in general, mainly due to the effects of earlier increases in energy and materials prices and weaker growth in exports,'' the central bank said in a quarterly report in Tokyo today. It was the first time the bank cut its view of all areas since the report began in 2005.

Japan may have entered a recession even before the global financial crisis deepened last month: the economy shrank in the second quarter and factory output, machine orders and household spending fell in August. The Nikkei 225 Stock Average lost 20 percent this month, eroding the wealth of consumers already facing inflation that's outstripping wage growth.

“Private consumption was relatively weak, mainly due to sluggish growth in household income and the increase in prices of energy and food,'' the central bank said.

Economic conditions differed from region to region. In Hokkaido, the northernmost prefecture that depends on agriculture and public works spending, the economy is in a “somewhat severe situation,'' the central bank said electronic check payday advance.

In contrast, Tokai, home to Toyota Motor Corp. and Suzuki Motor Corp., remains “at a high level, although it is on a downtrend.''

Central bank Governor Masaaki Shirakawa earlier told the managers that Japan's growth “will likely be sluggish for the time being as a slowdown in overseas economies becomes more evident.''

At the previous meeting in July, Shirakawa said Japan will resume a moderate expansion after slowing for a while — a phrase that he dropped today. The policy board maintained this month that growth will pick up “in the longer run.''

“The Bank of Japan may omit the sentence referring to a pickup in the economy when it releases its semiannual economic outlook'' on Oct. 31, said Azusa Kato, an economist at BNP Paribas in Tokyo. “If that happens, it will mean the bank has given up on its scenario of an economic recovery.''

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October 15, 2008

GM would seek cash to acquire Chrysler

Filed under: finance — Tags: , , — Insurancent @ 3:43 pm

DETROIT–For General Motors Corp. to acquire Chrysler LLC and all of its warts, GM would have to get desperately needed cash as part of the deal. Lots of it, according to industry analysts.

With both automakers struggling to survive amid slumping sales, a slowing global economy and an unprecedented credit crunch, it’s unclear whether Chrysler’s majority owner, Cerberus Capital Management LP, would be willing to pay up, or whether Washington might even get involved to save one or both struggling automakers.

"There’s got to be more in it for GM than just Chrysler," said Erich Merkle, an auto industry analyst with Crowe Horwath LLP, an accounting and consulting firm. "If you put two auto companies together, both that are losing money, both that are losing market share, you’ve just got an auto company that’s losing market share faster and losing more money.”

GM and Cerberus, which owns 80.1 per cent of Chrysler, have held preliminary talks about an acquisition or other combination of the two automakers, according to persons familiar with the discussions who did not want to be identified because the talks have not been made public.

A tie-up between the automotive giants would be historic for the industry and solidify GM’s position as the global sales leader, which it has been in danger of losing to Toyota Motor Corp.

GM and Chrysler already have a joint venture with BMW AG making a hybrid gas-electric powertrain. While melding the companies could save money by combining management, engineering, manufacturing and administrative staffs, analysts say consolidation would bring more costs and the rewards probably wouldn’t come for several years.

That might be too late for both automakers.

Auburn Hills-based Chrysler, a privately held company, doesn’t have to open its books, but it lost at least $510 million (U.S.) in the first quarter and $1.6 billion last year. Its sales are down 25 per cent so far this year, the worst drop of any major automaker.

Detroit-based GM is burning up more than $1 billion in cash per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year. Sales are down 18 per cent, and the company has lost $57.5 billion in the past 18 months, largely because of tax accounting changes.

All of this comes as U.S. sales have slowed to their lowest point in 15 years, making bankruptcy possible for all of the cash-strapped Detroit Three if things don’t turn around soon enough.

Not exactly the prime scenario for a GM-Chrysler combination, said analyst Kevin Tynan of New York-based Argus Research Corp.

"Even though you’re getting the rationalization of folding the two businesses together, it doesn’t make sense at this time," he said low fee payday advance. "There’s got to be some sort of outside motivation for them to do that sort of deal, especially in this market.”

That outside motive, analysts speculated, could be the federal government, which would inherit massive pension liabilities if either company went under.

In exchange for taking on Chrysler, analysts envisioned that GM could be given access to low-rate emergency borrowing from the Federal Reserve’s discount window, used in normal times by banks.

GM, though, said it is not going to the Fed at present.

"We’re not actively pursuing anything at this time," said Greg Martin, GM’s Washington spokesperson.

The Wall Street Journal reported late Friday that Cerberus might trade Chrysler for GM’s 49 per cent stake in GMAC Financial Services. Cerberus bought 51 per cent of GM’s former financial arm for $14 billion in 2006, but since then GMAC has suffered because of bad mortgage loans.

GMAC could look good to Cerberus now, Merkle said, because its insurance and auto businesses are profitable and the federal government may take on its bad mortgages through the $700 billion financial bailout plan approved earlier this month.

If a merger were to go through, GM could move quickly to cut costs and save billions, said Van Conway, a mergers and acquisitions expert and partner with Birmingham, Mich.-based Conway & MacKenzie. The company would have to calculate whether it has enough cash to stay alive and fund the deal, he said.

If the numbers work, a lean, merged automaker would be in a strong position to make money once the U.S. market recovers and people start buying vehicles again, Conway said.

Neither GM nor Chrysler would confirm that they’ve talked, but each said discussions between automakers are routine. There also were weekend reports that Chrysler was in talks with Nissan-Renault, and The New York Times reported that GM had approached Ford Motor Co. about a merger earlier in the year, but Ford wanted to stay independent.

The auto industry has been hit hard in recent weeks by the effects of the credit crisis, prompting GM and Ford to issue statements Friday to dispel the notion that they might be headed for bankruptcy.

GM and Ford shares were battered with the rest of the stock market this week, falling to lows not seen in decades. GM shares lost about half of their already-depressed value during the week, closing at $4.89 on Friday. Ford shares fell similarly, ending the week at $1.99.

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October 12, 2008

Levinson Homes properties go up for foreclosure

Filed under: technology — Tags: , , — Insurancent @ 5:07 am

Another big local builder of houses appears to be getting squeezed by the weak housing market.

Several properties owned by Levinson Homes, of Chesterfield, are set to be sold at foreclosure auction Thursday, according to St. Louis County public notices. The properties include dozens of lots in two developments, the Wynncrest subdivision in Wildwood and Terra Vista in Chesterfield. Prices in those developments began in the $600,000s and at $450,000, respectively.

The foreclosure proceedings were initiated by Levinson’s lender, Royal Banks of Missouri. Chief operating officer Mitchell Baden confirmed the auctions, but declined to comment further. Levinson Homes Chief Executive Ed Levinson did not return a message Tuesday.

Levinson has been building houses in the St. Louis area for more than 50 years and has completed more than 20 developments, mostly in west St. Louis County.
TIM LOGAN

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October 11, 2008

Pfizer continues realigning with 3 new units

Filed under: news — Tags: , , — Insurancent @ 4:10 pm

TRENTON, N.J. — Pfizer Inc. told employees worldwide Tuesday it is replacing its current geographic divisions with new ones focused on primary care, specialty care and operations in emerging markets.

The new units, which will begin operating at the beginning of next year, will have complete responsibility for functions including strategic planning, sales and marketing, and even drug development process — testing experimental compounds in people and tinkering with them to come up with the best dose.

Research operations, including identifying potential compounds and testing in the laboratory and in animals, will remain independent, said Pfizer spokesman Ray Kerins.

Pfizer employs 1,100 at a research facility in Chesterfield.

Last week, Pfizer confirmed that it was making changes in its research operations as it shifted its focus to diseases that have high potential for big profits and for treatment improvements, such as cancer and Alz?heimer’s disease direct faxless payday loans. The impact from that set of changes on the operations in Chesterfield had yet to be determined, Pfizer said.

The changes announced Tuesday are aimed at enabling the company to respond better to the needs of doctors, patients and government and other payers, while increasing innovation and holding the independent business units accountable for meeting targets, Kerins said.

"We believe this is where the company can best unlock the value for customers," he said.

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October 9, 2008

Missouri and Illinois to benefit from Zyprexa settlement

Filed under: legal — Tags: , , — Insurancent @ 8:13 pm

Missouri and Illinois are among 32 states, along with the District of Columbia, that have agreed to a $62 million settlement with drugmaker Eli Lilly & Co. over its top-selling drug Zyprexa, an antipsychotic medication.

Lilly agreed to resolve an investigation into the company’s marketing practices. Attorneys general from several states accused Lilly of marketing Zyprexa for off-label uses and inadequately disclosing the drug’s side effects to health care providers, the same claims made in other litigation against the drugmaker.

Lilly was accused of marketing the drug for pediatric care, for use at a high dose and for the treatment of dementia. Doctors are free to prescribe drugs for uses not approved by the FDA, but drug companies cannot market them for those situations.

The company did not admit wrongdoing in the settlement. The $62 million will be divided among the states and the district based on population (payday loan).

Lilly also agreed to several mandates that will last until 2014, well beyond the expiration of Zyprexa’s patent in 2011. The company agreed to avoid making false, misleading or deceptive claims about the drug and not to promote it outside FDA-approved uses.

The drugmaker also agreed to give its medical staff, not the marketing staff, ultimate responsibility for approving the content in all medical letters and medical references regarding Zyprexa.

Lilly spokesman Phil Belt said many of the items his company agreed to were things it either already did or was in the process of doing.

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