Paul L. Caron

Wednesday, September 17, 2014

Thomas Jefferson Law School Defaults on $133m of Junk Bonds, Hopes to Restructure Debt and Remain Open

Thomas Jefferson LogoFollowing up on my previous post, S&P Downgrades Many Law Schools, Thomas Jefferson Falls to Junk Bond Status:  Above the Law, Troubled Law School Defaults On Its Bonds, May Be Forced To Cease Operations:

Under the copy of the Event Filing and Agreement we received, the law school had until September 5, 2014, before remedial action would be taken by its Bondholders under the direction of its acting Trustee. ...  (Ed. note: In its official response, TJSL states that a new Agreement is now in effect, and that it runs through October 17, 2014.) Thomas Jefferson Law may not be able to stay open if it can’t restructure its financial obligations, which currently total $133,390,000. As set forth in the Agreement, TJSL pledges that it will “work in good faith to diligently negotiate a reasonable restructuring of its obligations under the Loan Agreement that will enable TJSL to remain in operation.”

We received this official statement from a representative of the Thomas Jefferson School of Law after the original story was published exclusively on Above the Law:

While it is correct that the School did not make a payment on June 26th, the School has paid most of the June payment and has engaged in constructive dialogue with its bondholders to restructure its obligations. Those constructive discussions have resulted in a series of agreements through which the bondholders have agreed not to exercise their remedies. The most current such agreement runs through October 17th (not September 5), and we are confident that a consensual restructuring will occur.

For several months the School, its legal counsel, and financial advisors have worked closely with the bondholders, their representatives, legal counsel, and financial advisors. The parties have a mutual interest restructuring the law school’s debt in a way that will allow the school to remain in operation and prosper. As part of the negotiations, various potential structures and restructuring alternatives have been discussed. At the core of each alternative is ensuring the school can provide the educational experience required of an ABA accredited school and ensure the school’s long term success.

The parties are currently considering the various approaches that have been developed by the advisors to the school and the bondholders, and are confident that an agreement will be reached in the near term.

The School expects to have additional positive information concerning our work with the bondholders within the next few weeks. Because a restructuring of the School’s obligations to the bondholders is likely, the School believes that it will be able to continue to prosper.

ABA Journal, Law School Misses Bond Payment, Seeks to Restructure Obligations

Thomas Jefferson's students have the lowest bar exam pass rate (50%) among California's 21 ABA-accredited law schools; the second-fewest full-time, long-term jobs as lawyers (29%) within nine months of graduation among California's 21 ABA-accredited law schools; and the most law school debt ($180,665) among the nation's 200 law schools.  Thomas Jefferson's latest available Form 990 lists the Dean's total compensation as $528,430 and nine other faculty and adminstrations with total compensation in excess of $175,000.

Update:  Wall Street Journal, Thomas Jefferson School of Law Gets Reprieve after Missed Bond Payment:

Thomas Jefferson School of Law is scrambling to restructure its debt after blowing a bond payment deadline.

The downtown San Diego private law school has disclosed in a financial filing that it failed to meet its entire debt obligations in June. But an agreement the school struck with creditors staves off doomsday at least until Oct. 17, while requiring it to come up with another $2 million.

School officials say they’re counting on reaching a restructuring deal with bondholders, who’ve agreed not to pursue legal remedies for the time being.

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This place charges $49k / year tuition. I would expect that $200k + non-dischargable debt upon graduation (plus interest after graduation, of course) would be the norm, when living costs are factored in. Now let's consider a degree from this fine institution gives you a 3 in 10 chance of getting a full time job as a lawyer - and how many of those jobs are 60 hrs a week / $45k a year deals?

Assume as a new student you are paying full freight and are fully financing through student loans. Attending this school has about an 80% chance of setting you back a decade or so at best, and ruining you financially for the rest of your life at worst. The odds of attending under these circumstances being a positive decision have to be less than 1%.

The students would be truly lucky if this hellhole closes. They would then qualify for the closed school loan forgiveness program.

Posted by: Flharfh | Sep 18, 2014 9:41:10 PM

I was going to offer to be dean, teach a class, and be admissions staff for $200k, but I now want whatever job HTA would not leave for the $500k salary of Thomas Jefferson's dean. :) Give me one year of that dean's salary and I might just be able to payoff my law school loans after taxes.

Posted by: Daniel | Sep 17, 2014 11:45:47 AM

In defense of TJLS, who would want to be dean there given its current situation? You couldn't pay me enough to take that job.

Posted by: HTA | Sep 17, 2014 10:19:04 AM


29% truly employed within nine months of graduation

$528,430 dean salary

Looks like the only ones prospering are the dean and crony staff.


Only a criminal would continue to prey upon the unwise instead of doing the honorable thing and ending this misery machine, like murderer who seeks redemption through identifying the graves of his victims.

Posted by: terry malloy | Sep 17, 2014 9:48:29 AM

Could someone explain to me who thought assuming $133 million dollars in debt purely to have a shiny new building was a good idea? I mean, going under because of a vanity project is just a sign of profoundly poor judgment.

Posted by: twbb | Sep 17, 2014 9:47:54 AM

Whoo-eee. I can save them some money. Fire the Dean and I'll do the job for only 200K. Chuckle.

Posted by: jimbrock | Sep 17, 2014 9:05:37 AM

And so it begins...

Posted by: Unemployed Northeastern | Sep 17, 2014 8:36:32 AM

I'm not really sure that the school can say that it will "continue to prosper" given that only 85/293 class of 2013 graduates got FTLT bar passage required jobs. That doesn't meet any definition of "prosper" I recognize.

Posted by: Former Editor | Sep 17, 2014 6:17:02 AM