This is a follow up report on a recent post about Thomas Jefferson School of law. Things don’t look good.

Paul Caron of the TaxProfBlog reports.

S&P Lowers Thomas Jefferson Law School’s Junk Bond Rating to CC (3 Notches Lower Than Venezuela’s); Default Is Expected

Following up on Wednesday’s post, Thomas Jefferson Law School Defaults on $133m of Junk Bonds, Hopes to Restructure Debt and Remain Open: Standard & Poor’s, Thomas Jefferson School of Law, CA Rating Lowered To ‘CC’ From ‘B+’, On Watch Neg; Failure To Make Loan Payments Cited:

Standard & Poor’s Ratings Services lowered its long-term rating to ‘CC’ [“default imminent with little prospect for recovery”] from ‘B+’ [highly speculative”] on the California Statewide Communities Development Authority’s series 2008A tax-exempt revenue bonds and series 2008B taxable revenue bonds issued for Thomas Jefferson School of Law (TJSL). At the same time, Standard & Poor’s placed the rating on CreditWatch with negative implications.

“The rating action reflects our view of TJSL’s failure to make payments in full to the trustee of its June 26 loan payment, which secures the series 2008 bonds, and our anticipation that it will not make its Sept. 26 loan payment in full either,” said Standard & Poor’s credit analyst Carlotta Mills. We understand the school has made partial payments toward debt service, though we were unable to confirm from the trustee or the school if the debt service reserve has been drawn upon to pay bondholders.

“The CreditWatch designation reflects our understanding that the school has had multiple forbearance agreements with its bondholders and that it is working toward a restructuring of the debt, due to be in place by Oct. 17,” continued Ms. Mills. We expect that the bonds will default once the restructuring is completed.