Thomas Jefferson School of Law said it signed a restructuring agreement with its bondholders, reducing its debt from $127 million to $40 million, and lifting the cloud of default.

In return for the huge discount, the bondholders became owners of the school’s Gaslamp Quarter building, which cost about $90 million and was completed in 2011.

The school issued some $133 million in bonds in 2008 to construct a new campus, and defaulted on its monthly payment in June.

In addition to taking ownership of the property at 1155 Island Ave., bondholders also get $40 million in newly issued debt, carried at 2 percent. The school previously had been paying interest of 7 percent on the non-taxable portion of the bonds, and 11 percent on the taxable part, according to the law school.

With the reduced debt, the San Diego law school said it cut its annual debt payments in half from $12 million to $6 million, which includes $5 million in rent, and $1 million in interest expense.

Thomas Guernsey, Jefferson’s dean and president, said the restructuring is a major step. “It puts the school on a solid financial footing and will enable Thomas Jefferson to continue to fulfill its mission serving a diverse group of students in a collegial, supportive learning environment.”

Guernsey said school operations remain unchanged under the new agreement that was officially signed Oct. 28.

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