New Orleans casino owner files for reorganization

Kevin McGill

Thursday, Jan. 4, 2001 | 3:15 a.m.

NEW ORLEANS - The owner of the troubled New Orleans casino filed for reorganization in federal bankruptcy court Thursday, an expected part of the company's plan to survive monthly losses while seeking a cut in its $100 million annual state tax.

JCC Holding Co., owner of Harrah's New Orleans Casino, made the announcement in a news release. The casino will remain open until at least through March 31st when Harrah's Entertainment Inc., a major investor in the casino, stops paying the tax, the statement said.

Harrah's Entertainment operates the casino for JCC Holding and owns 43 percent of it.

"No disruptions in employment or operations are expected during these proceedings unless the relief sought by JCC is not obtained and a bankruptcy plan cannot be timely approved and consummated by March 31, 2001," the company said.

The bankruptcy reorganization is designed to restructure JCC Holding's $450 million in long-term debt. However, a tax reduction and other concessions the company wants from the state, including a casino hotel and unlimited casino restaurants, will require action from the Legislature. A bankruptcy court cannot change state law.

Gov. Mike Foster reiterated Thursday that he does not plan to call the Legislature into session to discuss such changes unless there is widespread consensus among lawmakers on what to do.

"We have not heard anything regarding a special session being called. Obviously we're hopeful," casino spokesman Mark Romig said.

JCC Holding has been losing about $8 million a month since opening. Under the contract with the state, a third party, in this case Harrah's Entertainment, must guarantee the tax payments if JCC Holding does not have the money.

Harrah's Entertainment has been making some of the $274,000 in daily tax payments, but will cease to do so when its guarantee expires. The casino must close without a guarantee.

Foster's office said he would have no comment. However, in his weekly radio-television address earlier in the day, Foster again said he would not call a special session to deal with Harrah's until legislators reached a consensus.

"The choice is: do we want their money or not," Foster said.

Foster said any renegotiated deal would involve a long-term commitment from Harrah's so that money could be dedicated to education.

"If we could get that into our budget, it would help us a lot," the governor said.

Foster campaigned in 1995 as a gambling opponent but has been widely criticized for failing to block the spread of gambling. He said saving the casino obviously would be beneficial to the region and the employees of the company.

"I hate to say this, but it seems to be, from a business standpoint, the best thing for the state of Louisiana," he said.

The casino's original owner, Harrah's Jazz Co., closed a temporary casino in November 1995 and filed for bankruptcy reorganization. JCC Holding emerged from that proceeding in late 1998 and opened the current casino about a year later.

Longtime casino critic C.B. Forgotston said it was obvious that JCC Holding was in trouble from the time the first monthly report of gambling winnings came in. He said he believed the main purpose of the filing was to level political pressure on the Legislature.

"They claim they need three months to get through bankruptcy, but it took them over three years last time," Forgotston said.

"Now, I think this might backfire on them," Forgotston said. "Common sense would say that if a company is in bankruptcy, wouldn't you wait to see it work its way through reorganization before you start throwing tax concessions at them."

In a related development, the state legislative auditor has sent an audit of the casino's finances to the governor and is expected to release the findings Friday.

The audit reportedly paints a dark picture of the casino's financial situation, but neither Foster nor Legislative Auditor Dan Kyle will give any details.

Kyle prepared the audit after the governor and the legislative leadership ordered it. The order overruled the Legislative Audit Advisory Committee which had refused to go along with State Treasurer John Kennedy who requested an audit.