New Orleans casino owner files for reorganization

Kevin McGill

Friday, Jan. 5, 2001 | 9:56 a.m.

NEW ORLEANS - JCC Holding Company, the owner of the money-losing Harrah's New Orleans casino, has taken Step 1 in its effort to transform itself into a profitable business: It went to bankruptcy court to reorganize its huge debt.

The next steps will be much more difficult: persuading the Legislature to meet in special session and grant a cut in its huge annual tax.

One factor in lawmakers' decision may be a report by Legislative Auditor Dan Kyle. Kyle has sent an audit of the casino's finances and public release of the findings was expected Friday.

The audit reportedly paints a dark picture of the casino's financial situation, but neither Gov. Mike Foster nor Kyle would give any details when questioned earlier this week.

On Thursday, JCC Holding announced that it was filing for reorganization in federal bankruptcy court. The casino will remain open at least through March 31st when Harrah's Entertainment Inc., a major investor in the casino, stops guaranteeing daily payments of the casino's $100 million minimum annual tax.

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 time 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.

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 Thursday, 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 approximately 3,000 workers the casino employs.

"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.