Analyst says New Orleans pullout is a possibility

Tuesday, March 21, 2000 | 10:50 a.m.

A gaming bond analyst suggested in a recent report that Harrah's Entertainment Inc. may pull out of its New Orleans casino within a year if revenues don't improve.

In a 20-page report, SG Cowen Securities analyst John Maxwell Jr. said he expected the company to pull out in April 2001 unless revenues at the property improve significantly. He said the casino's costs remain too high and don't justify the future financial benefits of the property.

The Louisiana Gaming Control Board today reported February revenues of $20.4 million at the New Orleans casino, up 6 percent from January.

Harrah's owns 43 percent of the stock in JCC Holding Co., owner of the New Orleans casino. Harrah's also manages the property. The Las Vegas company has guaranteed tax payments of at least $100 million per year to the state of Louisiana, regardless of the casino's financial performance. Despite these heavy costs, the casino's impact to Harrah's bottom line is relatively trivial, Maxwell said.

The casino has yet to post a profit since opening in November.

Harrah's officials were not available to comment on the report.

Maxwell is not the first analyst to suggest Harrah's may pull out of New Orleans. Recently, Robertson Stephens gaming analyst Harry Curtis wrote that there were two potential outcomes for the New Orleans property in the next year: "either results improve or Harrah's terminates its commitment to the project."

Curtis cited heavier-than-expected losses -- between $5 million and $7 million this quarter -- as partial justification for lowering earnings estimates on Harrah's.