Prominent Beirut university hit by coronavirus cash crisis

The American University of Beirut is currently in the midst of the worst crisis it has faced in its long history. (Shutterstock)
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Updated 09 May 2020

Prominent Beirut university hit by coronavirus cash crisis

  • AUB cuts staff amid perfect storm of Lebanese currency crash, COVID-19 pandemic and unpaid government debts

BEIRUT: One of the Arab world’s oldest universities faces its worst crisis since its foundation, with huge losses, staff cuts and an uphill battle to stay afloat as Lebanon’s economic meltdown and the coronavirus pandemic hit revenues.

The American University of Beirut (AUB) has graduated leading figures in medicine, law, science and art as well as political leaders and scholars over the decades.

It has weathered many crises, including Lebanon’s 1975-1990 civil war, when a number of staff, including two presidents, were killed or abducted, and a bomb destroyed one of its main halls.

But Lebanon’s problems now may be the biggest threat yet to the institution founded in 1866 by Protestant missionaries. It ranks among the world’s top 200 universities and its collapse would deprive future generations in Lebanon and the wider region of internationally recognized higher education.

“This is one of the biggest challenges in AUB’s history. The country is crashing catastrophically,” AUB President Fadlo Khuri told Reuters in an interview.

With inflation, unemployment and poverty high, many families have little means to cover food and rent, let alone tens of thousands of dollars in tuition fees.

The heavily indebted state, which defaulted on its foreign currency debt in March, owes AUB’s medical center — which attracts patients from across the Middle East and Central Asia — more than $150 million in arrears.

Government officials have ruled out a haircut on the bank deposits of non-profit universities such as AUB, but Khuri still fears his institution may take a hit if a state rescue plan puts part of the burden on large depositors and includes colleges.

Along with other universities, his school has lobbied the state and, he said, received assurances from the president and finance minister that any such measures would not impact them.

But he remains worried, with plans for plugging vast holes in the national finances not yet finalized. “We have all this money they (the state) still owe us for the hospital so it’s very hard to rely on well-intentioned people who may or may not have the ability (to deliver),” he said. Government officials could not be reached for comment. 

The university and hospital expect real losses of $30 million this year after bleeding revenues. For 2020-2021 alone, it projects a 60 percent revenue reduction from this year, down to $249 million.

The stark revenue forecasts rely on an “optimistic assumption” that the Lebanese pound will stabilize at 3,000 to the dollar, but Khuri has said they do not take into account a possible haircut imposed on AUB’s bank deposits in Lebanon.

Finance Minister Ghazi Wazni has said there will be a shift to a flexible exchange rate in the “coming period.”

Khuri said AUB would have to set its own rate in the meantime, taking into account people who say they can pay in dollars to help cushion the impact of the pound’s collapse on poorer students.

AUB has already lost donations and scholarships it was expecting before the pandemic. On top of benefit and wage cuts, it is studying options such as closing whole departments and halting spending.

In an email to students and families, Khuri promised to work to protect their livelihoods and to raise money via an emergency fund.

“But there is no question that sacrifices must and will take place at every level,” Khuri wrote. “We must fundamentally change in order to survive ... Saving AUB must be our only priority. And save it we will.” 


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.