Thursday, April 4, 1996 | 11:59 a.m.
The formal plan put in federal bankruptcy court Wednesday closely tracks a Harrah's Jazz proposal to state negotiators in the casino case.
It also calls for full payment to unsecured creditors and would make bondholders the majority equity owners of the casino.
Harrah's Jazz had hoped to have the state's blessing, but a decision from the administration of Gov. Mike Foster was held up by a competing proposal filed by ITT Corp., the parent of Caesars World casinos, and interest shown this week by Hilton Hotels Corp. in taking over the project.
"The proposal is under consideration along with all the others, but the governor has agreed to submit any proposal which alters the operating agreement to the Legislature, and he is not prepared to do that at this point," Foster spokeswoman Marsanne Golsby said of the Harrah's Jazz plan.
Attorneys for Harrah's Jazz said they hoped U.S. Bankruptcy Judge T.M. Brahney III would approve the plan by June 30.
After today, competitors can file reorganization plans to take over the project from Harrah's Jazz.
The project was shoved into bankruptcy court on Nov. 22, the same day the temporary casino closed after gambling revenue fell far below original projections during seven months of operation.
The plan calls for:
* A 56,000-square-foot casino to open at the foot of Canal Street around Jan. 1, in time for the 1997 Super Bowl. The casino would eventually be expanded to about 98,000 square feet. The top floor of the casino -- once planned for 200,000 square feet of gambling space -- would be converted into a multipurpose entertainment center.
"When the casino is finished, it will be one of the largest in the world," said Colin Reed, vice president of finance for Harrah's Entertainment Inc.
* For two years, the casino would be allowed to pay 25 percent of its gross revenue, instead of the $100 million minimum annual tax required for the permanent casino.
Reed said the move is proper since state law calls for the permanent casino to have 100,000 square feet of gambling space. The $100 million rate is financially impossible for the smaller casino, he said.
After the casino construction is finished, Harrah's Jazz would pay the full tax rate.
The governor and many legislators have treated that tax proposal coldly. Foster has said he expects Harrah's Jazz to abide by its contract with the state.
* The holders of $435 million in Harrah's Jazz junk bonds would receive 50.9 percent of the casino's equity. The other 49.1 percent -- valued at $75 million -- would belong to Harrah's Entertainment and its two current partners, a group of local investors known as Jazzville and another group headed by developer Christopher Hemmeter, if they chose to participate.
Reed said Harrah's Entertainment will put up the entire $75 million if the partners decide to drop out.
* Harrah's Entertainment will assume construction contracts for the casino building. In addition, about $8.5 million in debts owed unsecured creditors will be paid in full. Harrah's officials said future unsecured debt filings might not be covered fully.
Asked about Harrah's Jazz's contractual guarantee with the state for a monopoly on land-based gambling in the New Orleans area, Reed said: "That is what this company bargained for, that is what the bondholders bargained for and this is what the state bargained for."
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