Law Schools

Law School Gets Slapped With Negative Outlook By Credit Rating Agency

Now that its bond ratings are on the line (again), the law school's admissions profiles may grow even weaker.

By  
on

While the administrations at quite a few law schools are jubilant right now, optimistic that using the GRE for admissions purposes will open the floodgates that will put some much-needed butts in their seats, the administration of at least one law school is having a very dim holiday season. Why’s that?

Moody’s Investor Service just affirmed the school’s negative financial outlook, effectively handing it a lump of coal during its efforts to recruit students.

The law school in question is California Western School of Law, a standalone school whose Series 1998 bonds were downgraded from Baa1 to Baa3 last January based on “weak prospects for net tuition revenue growth.” Here’s the rationale Moody’s provided for Cal Western’s continued negative outlook:

California Western School of Law’ s Baa3 remains supported by still strong financial resources relative to its operating size, offsetting very weak operating performance, and modest amount of debt. The school, located in San Diego, has favorably demonstrated an ability to programmatically adjust to shifts in the law school sector and expand into new student markets. Continued enrollment growth and moderation of tuition discounts offer some prospects for gradual improvement in financial performance, although the school projects that operating deficits will continue until fiscal 2019. The school’s investment grade rating is further supported by its conservative debt structure with good headroom on covenants, and very healthy liquid reserves relative to similar rated peers.

Rating outlook

The negative outlook incorporates the risk that the school will continue to face challenges in stabilizing operating performance, with continued weak operating performance anticipated until at least fiscal 2019.

According to Moody’s, California Western’s outlook could be upgraded if the school provides proof of “[s]trengthened student demand evidenced by growing net tuition revenue.” Administrators at the school were already under pressure to admit students, but now that its bond ratings are on the line (again), the law school’s admissions profiles may grow even weaker. Take a look at the entering admissions profiles for Cal Western since 2010, courtesy of Law School Transparency:

Given the big dips in LSAT scores and GPAs for entering students over the years, the law school’s graduates tell the true tale of how the school is really doing. As far as employment is concerned, less than half of the class of 2016 at Cal Western found full-time, long-term jobs after graduation where bar passage was required. In terms of bar exam performance, just 50 percent of all test-takers from the school were able to pass the July 2016 state bar exam (although 61 percent of first-time takers from Cal Western were able to pass the exam on their first try).

Sponsored

Go ahead and try to grow your tuition revenue, Cal Western, but we know that it’ll be at the expense of future students who choose to enroll at the school.

Moody’s affirms California Western School of Law (CA)’s Baa3; outlook negative [Moody’s]

Staci ZaretskyStaci Zaretsky has been an editor at Above the Law since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

Sponsored

Topics

, ,