Jefferson like Dracula

Thomas Jefferson School of Law, whose students have dismal bar-exam and job-placement records, recently restructured the debt on its fancy, eight-story building downtown that it occupied in 2011.

Yesterday (November 5), the New York Times's DealBook column examined the deal with the bondholders and noted that "a troubled law school is like Dracula: hard to kill." Steven Davidoff Solomon of UC-Berkeley noted, "Failing law schools are kept on life support."

Said the Times, "A recent debt restructuring at Thomas Jefferson School of Law shows that a law school may be worth absolutely nothing."

The debt restructuring went through in late October, and Dean Thomas F. Guernsey boasted, "It puts the school on a solid financial footing."

The deal hardly puts bondholders on solid footing. Ninety percent of bondholders agreed that the debt would be reduced by two-thirds and annual cash flow obligation cut in half. The bondholders will own the building and lease it back to the school; and they'll get $40 million in new notes.

Comments the Times, "Thomas Jefferson got a sweetheart deal, but its creditors had no choice. If they shut down the law school, the only value left would be a law school building that would need to be repurposed and redesigned. A closed law school is worth little, or most likely nothing to creditors."