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Thomas Jefferson School of Law, bondholders enter restructuring deal
By Caroline Salls
Pittsburgh, Oct. 29 – The Thomas Jefferson School of Law has signed a restructuring support agreement with nearly 90% of its bondholders that reduces its debt by $87 million to $40 million, reduces annual cash flow obligations by $6 million and ensures continued operations of the school in its campus in downtown San Diego, according to a news release.
President and dean Thomas F. Guernsey said the restructuring agreement was needed to address the $127 million of bonds that were issued in 2008 to build the company’s new campus.
As part of the transaction, the bonds will be canceled. In exchange, the bondholders will become owners of the building and lease it back to the school.
In addition, the school said the bondholders will receive $40 million of new notes at an interest rate of 2%. Interest rates on the previous outstanding taxable bonds were more than 11%, with non-taxable bonds at more than 7%.
The school said it was paying about $12 million a year in principal and interest on its debt. Under the restructuring, the school will pay $5 million in annual rent and about $1 million a year in interest expense, cutting its annual payments to the bondholders by almost 50%.
Guernsey said school operations continue unchanged under the new agreement.
According to the release, the school began discussions on a debt restructuring in April. The school and the bondholders entered the support agreement on Tuesday.
“The improved financial stability enables us to continue to focus on improving results for our students in passing the bar and securing jobs in the legal profession,” Guernsey said in the release. “This includes adding new programs and improving core curriculum.”
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