OPEC+ Coalition Shaken as Iraq Pushed to Atone For Oil Cheating

OPEC+ Coalition Shaken as Iraq Pushed to Atone For Oil Cheating(Bloomberg) -- The grand alliance that’s helped revive global oil markets is being rattled by a long-running feud over members breaking their promises.Just a day before a proposed gathering on Thursday, the OPEC+ coalition hurriedly backtracked from the meeting intended to green-light an extension of its deepest production cutbacks and prop up crude prices.Saudi Arabia and Russia -- the leading producers in the group -- have lost patience with the errant behavior of the next-biggest member, Iraq, according to people familiar with the matter. While most of the main players are delivering their agreed share of output curbs, Baghdad is once again reneging on its commitments.At stake is the unity of the 23-nation partnership, which has helped engineer a doubling in international oil prices following the battering meted out by the coronavirus crisis. If the Iraqis, and other delinquents such as Nigeria and Kazakhstan, don’t shape up then Riyadh and Moscow are warning they will start to phase out the supply curbs that are putting a floor under the market.The kingdom and the Kremlin are pushing the stragglers hard -- not just demanding they implement the cuts already promised, but asking for deeper curbs in the coming months to compensate for their earlier failings.“Riyadh and Moscow are not kidding about implementing some form of compliance-improvement mechanism,” said Bob McNally, founder of consultant Rapidan Energy Group and a former White House official. “Without it, they walk.Impossible ChoiceSuch penance would be difficult for Iraq to accept. It made less than half of its assigned cutbacks last month, so compensating fully would require it to slash production by a further 24% to about 3.28 million barrels a day, according to Bloomberg calculations.For a country still rebuilding its economy following decades of war, sanctions and Islamist insurgency, that’s a tall order. Resisting the temptation of selling crude during the current market rebound, which has brought prices back to about $40 a barrel, may prove impossible.While Iraqi Finance Minister and Acting Oil Minister Ali Allawi did pledge to improve compliance with pledged cuts in an unusual Twitter post on Tuesday, he didn’t go any further.The Organization of Petroleum Exporting Countries and its allies pledged in April to slash oil output by 9.7 million barrels a day, or roughly 10% of global oil supplies, to offset the unprecedented collapse in demand caused by coronavirus lockdowns.A few weeks later, Saudi Arabia and its closest allies in the Persian Gulf pledged additional supply restraint of 1.2 million barrels a day in June.Riyadh and Moscow are aligned on continuing cuts at the current level for an extra month beyond July 1, according to people familiar with the matter. But if they don’t receive assurances from Iraq and the other laggards at their next meeting -- currently scheduled for June 9-10 -- the group’s daily supply curbs will ease to 7.7 million barrels for the rest of the year.Prince’s PriorityEnforcing better compliance among OPEC+ nations has been a motif since Saudi Energy Minister Prince Abdulaziz bin Salman was appointed.In his first public outing after becoming energy minister, in Abu Dhabi last September, bin Salman was literally applauded for securing loud pledges of atonement from Iraq and Nigeria.But his tenure has also been stormy, and the latest move has high stakes. In March, the prince’s attempt to force Russia to make deeper output reductions backfired spectacularly, splintering the entire alliance and igniting a destructive price war.Two months ago, bin Salman’s achievement in successful restoring the OPEC+ coalition and forging an agreement for historic production cuts was delayed and ultimately overshadowed by a spat over Mexico’s contribution to the deal.Consistent LaggardIraq’s recalcitrance is as old as the OPEC+ partnership itself, which was founded in 2016 to shore up oil prices against the onslaught of American shale.Baghdad argued that the exemption from cutbacks it had received since the conflicts of the 1990s should continue. The central government also has limited influence over about 500,000 barrels a day of production from the semi-autonomous Kurdish region.At the critical meeting where OPEC+ was formed, Oil Minister Jabbar al-Luaibi had to leave the conference room and call his prime minister for approval to accept the new strictures.Nonetheless, recent history suggests the burden might not be as onerous as it appears, and that Iraq’s resistance could be overcome.Last December, Baghdad was pressed to accept additional supply reductions, even though it had barely managed to cut output earlier in the year. Iraq knew it wasn’t expected to implement the entire package, but rather consider the new target as a spur to improve its performance, analysts said at the time.“It feels like Groundhog Day again as compliance issues complicate the effort to conclude a short roll-over agreement,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC. “Nonetheless, we still think these issues will be resolved and that a short extension will be announced.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Hong Kong Bull Market Found Dead in a Posh Flat

Hong Kong Bull Market Found Dead in a Posh Flat(Bloomberg Opinion) -- Hong Kong’s finance industry is thriving from the great divorce between the U.S. and China. Billion-dollar initial public offerings are on the horizon again, as New York-listed mainland companies seek a second home. The city’s blue-chip index has even revised its weighting rules so tech stocks can feature more prominently. But is this enough to rouse a sleepy stock market? While Hong Kong is on par with Shanghai in terms of total market capitalization, turnover pales in comparison, and it's practically a stagnant pool compared with the very liquid Shenzhen bourse. While mega IPOs are exciting, they are one-time events. Once bankers earn their fees and wave goodbye, trading could languish again.South Korea may offer some insights. One year ago, Seoul was still in a deep bear market, plagued by steep conglomerate discounts and historically low turnover. Now, it’s teeming with life. Since global markets started turning around in late March, the benchmark Kospi index has soared more than 40%, making it one of the world’s best performers.All of a sudden, Koreans, who dabbled in cryptocurrencies and all sorts of structured products, are frantically buying cash equities. Retail investors have single-handedly supported the main stock index as foreigners and domestic institutional investors sold.CLSA Ltd. recently conducted a fascinating study explaining what’s become one of the Kospi’s largest ownership changes in history. Survey data show a few usual suspects: historically low deposit rates, cheap valuations, and blow-ups in popular alternative investments, such as mezzanine convertible bonds and equity-linked securities. A liquidity crisis and global market meltdown have tamed Koreans’ taste for exotic products.But the most interesting finding is that investors are swapping their real estate holdings for stocks. This comes as President Moon Jae-in’s administration has made it harder to invest in residential property, with a recent ban on mortgage lending for anything valued over 1.5 billion won ($1.2 million). In the past few years, a series of tightening measures has worked: A flattening of home prices, along with dwindling sales volumes, dented investor sentiment.Apartments in Seoul were once considered one of Korea's best performing long-term assets. They registered a capital gain of 80.9% over the past 15 years, with flats in the affluent Gangnam district returning more than 200%, data provided by CLSA show. Yet property restrictions look set to remain as long as Moon’s around — and he’s not required to leave office until 2022. So people with money to invest have to look elsewhere. Samsung Electronics Co., which gained 443% over the same period, is a good alternative. Retail investors have poured $7.2 billion into the company’s shares this year. Many of the catalysts that drove Koreans to stocks are present in Hong Kong, too. Interest rates are even lower and high-profile stocks are landing, including NetEase Inc., while Alibaba Group Holding Ltd. completed its secondary listing last year. Meanwhile, local investors can no longer count on HSBC Holdings Plc for reliable dividend payouts, forcing them to look at tech companies instead. It’s no coincidence that the retail portion of NetEase’s Hong Kong listing was met with brisk demand on the first day, enabling the company to increase its allotment to local investors. The missing piece, however, is real estate. As soon as Hong Kong loosened its social distancing rules in May, secondary home-sales prices ticked up, along with transaction volume. The Land Registry recorded 6,885 property deals in May, a 12-month high. The faith that this sector can outperform stocks hasn’t broken yet.  For an equity market to shine, local retail participation is essential. Overseas institutional investors, the biggest contributors to Hong Kong’s turnover, come and go. Those from the mainland, now active players through the stock connect, are equally fickle, given they’re so used to liquidity-driven markets back home. So unless Hong Kong moms and pops can learn from the Koreans — trading away their flats in Gangnam for a slice of Samsung — the Hang Seng will remain asleep.  This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Len Blavatnik Gets $6.6 Billion Richer After Contrarian Music Bet

Len Blavatnik Gets $6.6 Billion Richer After Contrarian Music Bet(Bloomberg) -- Len Blavatnik bought Warner Music Group Corp. for $3.3 billion in 2011, as the global music industry was grappling with plummeting record sales and a transition to digital listening dominated by piracy.He took the company public Wednesday with the stock pricing at $25. The shares surged 20% to close at $30.12, giving Warner Music a market value of $15.6 billion after its first day of trading.Entities controlled by Blavatnik, 62, sold about 77 million shares and Warner Music won’t receive any of the proceeds, according to a regulatory filing. He will retain almost all of the voting power. A spokeswoman for Blavatnik declined to comment.Warner Music Shareholders Raise $1.9 Billion in Upsized IPOThe pricing was delayed to avoid clashing with Black Tuesday, when the music industry halted business to support protests against police brutality in the U.S, people familiar with the matter said.Its public debut, at almost four times more than what Blavatnik paid for it, underscores the music industry’s resurgence. Warner, whose vast roster of artists includes Lizzo, Ed Sheeran, Bruno Mars and Cardi B, now gets more than 60% of its recorded music revenue from digital sales, helping to insulate it from pandemic-induced lockdowns. Shares of streaming giant Spotify Technology SA have surged 23% this year.Warner Music IPO Aims to Strike Chord in ‘Six Feet Apart’ EraThe IPO and first-day gains boosted Blavatnik’s net worth by $7.5 billion to $31.2 billion, according to the Bloomberg Billionaires Index. The Ukraine-born American jumped to No. 28 on the ranking of the world’s 500 richest people, up from No. 41 on Tuesday.He began to amass his fortune with the purchase of oilfields and factories after the collapse of the Soviet Union, but the deal for Warner Music was his boldest gambit en route to becoming one of the world’s richest people.Blavatnik’s Contrarian Wagers Forge $26 Billion Global FortuneGlobal recorded music sales were $15 billion when he made the deal, with just a tiny fraction of that coming from streaming. By 2019, total sales had climbed to $20.2 billion, and the share from streaming had soared more than 900%.(Updates with closing share price in second paragraph, changes in net worth in sixth.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Fight Over ‘Predatory’ J.C. Penney Bankruptcy Loan Gets Ugly

Fight Over ‘Predatory’ J.C. Penney Bankruptcy Loan Gets Ugly(Bloomberg) -- The fight over who gets to fund J.C. Penney Co.’s bankruptcy is heating up.The U.S. retail giant filed for Chapter 11 protection last month with a $900 million financing package lined up from senior lenders including H/2 Capital Partners LLC and Silver Point Capital LP, according to a presentation at the time. Another set of lenders has lambasted the deal, calling the terms “predatory” in court documents and accusing the other group of strong-arming J.C. Penney.The firms opposing the loan have offered a similarly structured, cheaper financing package that gives Plano, Texas-based J.C. Penney more discretion in bankruptcy, the group said. The group includes hedge fund Aurelius Capital Management, according to a person with knowledge of the plan. A spokesman for Aurelius declined to comment. The retailer’s current loan proposal requires the company go through with an agreed-upon restructuring and gives lenders the ability to veto the plan, according to court papers.“This court and the debtors should not be bullied into yielding to the threats of predatory lending terms that come at the expense of employees, customers, vendors and other creditors,” attorneys for opposing lenders wrote in court papers. The “only answer” as to why J.C. Penney won’t embrace the alternative loan is that the proposed lenders “threatened to use their 75% position in the first lien debt to force the debtors into a liquidation if they don’t get their way,” they write.Commitment FeeThe Wall Street Journal earlier reported Aurelius’s involvement. J.C. Penney entered Chapter 11 protection last month having already paid a $45 million commitment fee on the proposed financing package. The loan is contingent on a plan to, among other things, get approval from senior creditors on a new business plan by July 14 and spin some of its properties into a real estate investment trust.Financing tied to a specific Chapter 11 strategy is increasingly common in corporate bankruptcy. Such deals can help companies cut costs and exit bankruptcy quickly, but concerns have been raised about whether they may trample the rights of smaller creditors or lead to suboptimal deals.A J.C. Penney representative declined to comment. The company has said in previous court filings that its proposed bankruptcy financing was “instrumental” in arriving at its plan for exiting bankruptcy, one it says will save thousands of jobs and maximize recoveries for creditors.Attorneys for the proposed bankruptcy lenders didn’t immediately respond to a message seeking comment on Wednesday.A hearing on the bankruptcy loan is set for June 4.The case is J.C. Penney Company Inc., 20-20182, U.S. Bankruptcy Court for the Southern District of Texas (Corpus Christi)(Adds reference in third paragraph to Aurelius Capital Management as a member of the opposing lender group.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Private Equity Gets a Big Win With U.S. Nod to Tap 401(k) Plans

Private Equity Gets a Big Win With U.S. Nod to Tap 401(k) Plans(Bloomberg) -- Private-equity firms notched a major win in Washington with the Trump administration paving the way for the industry to tap a massive pot of money that has long been off limits: the trillions of dollars held in Americans’ retirement accounts.The Labor Department issued guidance Wednesday effectively allowing 401(k) plans to invest in buyout firms. The agency said the move will bolster investment options for consumers and let them access an asset class that can provide better earnings than stocks and bonds.In a statement, Labor Secretary Eugene Scalia said the action “will help Americans saving for retirement gain access to alternative investments that often provide strong returns.”The announcement is a significant deregulatory decision that private-equity lobbyists have sought for years. The move was blasted by consumer groups, which argue that high-fee private equity firms are inappropriate for unsophisticated investors because the industry locks up clients’ money for years and backs businesses seen as far riskier than plain-vanilla bond funds.Deregulatory AgendaBetter Markets Chief Executive Officer Dennis Kelleher, whose group has fought the Trump administration’s push to dial back rules, accused Labor of inappropriately using the coronavirus crisis to loosen restrictions on 401(k) investments. Labor’s press release noted that President Donald Trump had issued an executive order directing agencies to “remove barriers” that would stand in the way of the economic recovery from the pandemic.“The last thing the Department of Labor should be doing is enabling or encouraging retiree money to be diverted from transparent public markets with significant disclosure and investor protections to high-risk, dark private markets with little disclosure and few investor protections,” Kelleher said in a statement. “To use the pandemic as a pretext for this irresponsible action is adding insult to injury.”Public pension funds that manage employees’ retirement savings have a long history of investing in private equity. But complex regulations and concerns about being sued have until now kept individuals’ 401(k) plans out. The private-equity industry has ramped up its campaign to change the rules during the Trump administration, which has made cutting back regulations a core element of its economic platform.Labor’s guidance was focused on professionally managed investment funds that include several types of assets. The agency said it wasn’t green-lighting private equity investments to be offered as a standalone option.‘Positive Step’American Investment Council President Drew Maloney, whose group lobbies for private equity firms, lauded the move.“This is a positive step towards helping more Americans gain access to private equity investment, which regularly is the best performing asset class for pensioners including teachers and firefighters,” he said in a statement.The announcement was also praised by Securities and Exchange Commission Chairman Jay Clayton, whose agency has been considering ways to let retail investors access asset classes that have been largely reserved for the wealthy.Under current SEC regulations, firms such as Apollo Global Management Inc., Blackstone Group Inc., Carlyle Group Inc. and KKR & Co. are mostly limited to raising money from the super rich, sovereign wealth funds and pension funds.Democratizing InvestmentsGroom Law Group principal David Levine, whose firm requested the Labor Department guidance on behalf of its clients, said the move would have a notable impact on workers saving for retirement.“By issuing the guidance, the Department of Labor has taken great steps to democratize the use of private equity in many Americans’ largest investment asset -- their retirement accounts,” he said.(Updates with comments in sixth and 10th paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Tyson Reinstates Policy That Penalizes Absentee Workers

Tyson Reinstates Policy That Penalizes Absentee Workers(Bloomberg) -- Tyson Foods Inc., the biggest U.S. meat processor, will return to its pre-coronavirus absentee policy, which includes punishing employees for missing work due to illness. Workers with Covid-19 symptoms won’t be penalized, the company said.“We’re reinstating our standard attendance policy,” Tyson spokesperson Gary Mickelson said in an email. “But our position on Covid-19 has not changed: Workers who have symptoms of the virus or have tested positive will continue to be asked to stay home and will not be penalized. They will also continue to qualify for short-term disability pay so they can continue to be paid while they’re sick.”In mid-March, Tyson said that it was “relaxing attendance policies in our plants by eliminating any punitive effect for missing work due to illness.” That will no longer be the case, as the company shifts back to its usual policy that discourages absenteeism through a point system.Some of America’s largest meat suppliers reopened plants recently after a wave of coronavirus outbreaks forced temporarily closures in April, withering available supplies at grocery stores and driving up retail prices for beef and pork. While companies have taken measures such as increasing hand-washing stations, distributing face shields and doing temperature checks, experts and unions warn that workers are still being put in harm’s way in the name of food security as packers seek to boost output.Workers absenteeism has been high in some U.S. plants not just because employees are sick. Some are afraid to come in for shifts because of fears they will catch the virus. Under Tyson’s policy, staying home for fear of exposure could result in punitive measures.Physical distancing is nearly impossible in plants that operate processing lines at very fast speeds. There have been at least 44 meatpacking worker deaths and over 3,000 workers testing positive for Covid-19, according to estimates from United Food & Commercial Workers International Union.“It is irresponsible to move away from strong protections, paid sick leave, and attendance policies that support worker well-being and public health goals,” said Mary Beth Gallagher, executive director of Investor Advocates for Social Justice. “Instead, it appears the incentives and attendance policies further business objectives that may be out of step with keeping workers safe.”Tyson reiterated that its “position on Covid-19 has not changed,” in an emailed statement.“Team members who test positive for the virus or have Covid-19 symptoms receive paid leave and may return to work only when they’ve met the criteria established by both the CDC and Tyson.”On Tuesday, Tyson confirmed 591 positive Covid-19 cases out of 2,303 tested employees at its Storm Lake, Iowa, plant, which was shuttered last week. Limited production at the facility will resume on June 3, the company said, while separately confirming 224 positive cases out of its 1,483 employees at its Council Bluffs, Iowa plant.Mickelson also noted the steps the company has taken to slow the spread of the virus at its plants. These measures include pre-shift temperature checks, providing masks to workers, and creating physical barriers between workstations.(Updates with analyst comment, additional Tyson comment starting in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


Moderna’s New Vaccine Business Could Be Bigger Than COVID, Says 5-Star Analyst

Moderna’s New Vaccine Business Could Be Bigger Than COVID, Says 5-Star AnalystCoronavirus is a monster, a pandemic, a threat to humanity on a global scale.Do I overstate the case? Perhaps, but after nearly 375,000 deaths globally, and 6.2 million infections -- meaning there will be more deaths to come -- I don't think I overstate the case by much.Coronavirus has already tipped the United States into a recession, and most of the rest of the world as well. Airlines are barely flying, restaurants half-open -- if they're lucky -- and amusement parks even in countries such as China, which claims to have largely recovered from the epidemic, operate at a fraction of capacity. Before the world economy can recover, we simply must have a vaccine that permits businesses to open back up, full force.But here's the problem with that (for investors). The urgency of the need means that there will be intense pressure upon the companies, that discover COVID-19 vaccines, to distribute them regardless of whether they make a profit -- or even give their vaccines away for free. (Witness, for example, Gilead Sciences' commitment to distribute its first 1.5 million doses of the remdesivir anti-viral drug free of charge).And how is a company supposed to make a profit off of that kind of business model?The answer, as 5-star Chardan analyst Geulah Livshits explains in her latest note on Moderna (MRNA), could include the ability to use lessons learned from making one vaccine at low or no profit, to the production of other vaccines for a profit.Moderna, you see, is working to get U.S. Food and Drug Administration (FDA) approval of its new mRNA vaccine candidate (mRNA-1273) to prevent infection with the novel coronavirus SARS-CoV-2. In so doing, Moderna is perfecting such processes as using DNA plasmid templates, along with enzymes and buffer systems, "to assemble nucleotides into mRNA, which can then be formulated into lipid nanoparticles (LNPs) that can then be filtered, fill-finished into vials, and quality controlled" to produce safe, effective vaccines against COVID-19.In previous notes, Livshits has cautioned that Moderna's work on mRNA-1273 might produce only "modest" sales and perhaps even weaker profits. However, Moderna should be able to take expertise, generated in creating vaccines from mRNA without the need to grow chemicals in live cells, and apply it to the development of other vaccines in its pipeline. Such pipeline products include the company's vaccine against cytomegalovirus, which can cause permanent neurological injury in newborns, its Epstein-Barr virus (EBV) vaccine, and other vaccine programs aiming to defend against autoimmune diseases -- all of which may have longer-lived commercial potential than a COVID-19 vaccine.This is more than just a theory, by the way. As Livshits explains, Moderna has already used lessons learned from its Chikungunya (a virus transmitted by mosquitoes) vaccine program to optimize mRNA stability when manufacturing long mRNA strands such as those used to create the SARS-CoV-2 vaccine. Taking lessons learned from creating its coronavirus vaccine, and applying them to the creation of yet more vaccines against other diseases, would just be adding one more link in the chain, ultimately resulting in "faster production and easy switching from 1 program to another" -- and hopefully, reducing development costs and enabling fatter profit margins in the process.Overall, based on the 10 Buy ratings vs just 2 Holds assigned in the last three months, Wall Street analysts believe that this ‘Strong Buy’ is a solid bet. It also doesn’t hurt that its $89.33 average price target implies nearly 50% upside potential from current levels. (See Moderna stock analysis on TipRanks)To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.


Oil Whipsawed by Uncertainty Over OPEC+ Cuts and U.S. Stockpiles

Oil Whipsawed by Uncertainty Over OPEC+ Cuts and U.S. Stockpiles(Bloomberg) -- Oil swung between gains and losses as a drop in U.S. crude stockpiles was offset by rising fuel inventories, while uncertainty swirled over the future of output curbs by OPEC and its allies.American gasoline supplies rose to the highest level in more than a month and distillate inventories jumped by the most since January 2019, according to the Energy Information Administration. Those increases offset a larger-than-expected decline in crude stockpiles.“It was a bit of ‘sell the news’ when you saw a draw come out, and now we’re seeing a rebound,” said Matt Sallee, a portfolio manager at Tortoise Capital Advisors. “The price weakness is more a function of concern around the OPEC meeting.”Meanwhile, the leaders of OPEC+ -- Saudi Arabia and Russia -- are demanding that fellow members stop cheating on oil-output quotas or the measures that have revived prices may start to be phased out. Without a meeting to make changes to their pact, the group is due to start easing cuts next month. That could add to market supplies at a time when demand is still vulnerable and the world is just emerging from coronavirus lockdowns.Production curbs by OPEC and its allies have helped the market move toward balance, after the massive demand destruction at the height of the pandemic in April. But the recovery remains tenuous, with U.S. producers signaling they’re already prepared to re-open wells and oil consumption still soft in most of the world.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


OPEC+ keen to keep U.S. shale in check as oil prices rally

OPEC+ keen to keep U.S. shale in check as oil prices rallyWhen OPEC, Russia and their allies agreed in April to slash oil production, little did they expect that their initiative to prop up collapsing prices would be helped by a swift drop in U.S. output. Now that crude has rallied on the back of those cuts from below $20 a barrel to $40 or more, the group known as OPEC+ faces a fresh challenge: stopping U.S. shale production delivering another surprise by recovering equally quickly. "The plan is to stick to prices of $40-$50 per barrel because as soon as they rise any further to say $70 per barrel it encourages too much oil production, including U.S. shale," said a Russian source familiar with OPEC+ talks on the issue.