Lessons for Academic Leaders from Modern Restructuring Practice

34 Pages Posted: 20 Jun 2018

See all articles by Robert K. Rasmussen

Robert K. Rasmussen

University of Southern California Gould School of Law

Date Written: June 19, 2018


Financial distress has hit higher education. More and more universities and colleges are facing existential challenges as the competition for a dwindling number of students has put a strain on revenues. Unlike leaders in other industries, the presidents and chancellors of a financially distressed institutions of higher education cannot explore the possibility of a Chapter 11 filing under the Bankruptcy Code to restructure their obligations so that they align better with their revenues. Federal law prohibits Title IV loans – the lifeblood of virtually every university and college – from being made to students who attend a school that is in an insolvency proceeding. Yet academic leaders can take lessons from modern Chapter 11 practice: they can, in advance of financial distress, ensure that their boards of trustees have members who can provide advice to the schools’ leaders as to the difficult choices that they face; they can employ restructuring professionals who have experience in turning around operations without a bankruptcy filing; finally, given that many of these institutions have relatively few creditors, they can attempt to negotiate a restructuring support agreement that would restructure the schools’ debts without a bankruptcy filing. The options available to leaders in the higher education space are not as robust as the options available to leaders of private enterprise, but they do exist and can be useful in confronting financial distress.

Suggested Citation

Rasmussen, Robert K., Lessons for Academic Leaders from Modern Restructuring Practice (June 19, 2018). 92 American Bankruptcy Law Journal 233 (2018); USC CLASS Research Paper No. CLASS 18-13; USC Law Legal Studies Paper No. 18-13. Available at SSRN: https://ssrn.com/abstract=3198833

Robert K. Rasmussen (Contact Author)

University of Southern California Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089-0071
United States
213-740-6473 (Phone)
213-740-5502 (Fax)

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