Harrah’s Closes Down New Orleans Casino Project
NEW ORLEANS (AP) _ Harrah’s will close a temporary casino it opened here six months ago and stop construction of a permanent facility scheduled to open next summer because of financial problems, a state official said Tuesday night.
Harrah’s Jazz Co., the partnership that owns the $820 million project, also will file for voluntary bankruptcy protection Wednesday morning, said Max Chastain, chairman of the state casino commission.
``This is all based on events that have occurred since Sunday,″ Chastain said. The closure would throw about 2,000 employees out of work, he said.
Harrah’s Jazz is a partnership of Harrah’s Entertainment, an investment group headed by developer Christopher Hemmeter known as Grand Palais, and another group of politically well-connected investors known as Jazzville.
The decision to close reportedly resulted from a cutoff in funds by Bankers Trust, which was floating a major portion of the financing to build one of the world’s largest casinos on New Orleans’ riverfront.
Harrah’s Jazz spent nearly $40 million to convert the Municipal Auditorium into a temporary casino while it built the permanent structure. The entire project had an $820 million price tag.
Income from the temporary casino proved dismal following its May 1 opening, averaging a gambling take of about $13 million a month. Harrah’s had projected an average of $33 million per month during the year the temporary casino was expected to operate.
Harrah’s Jazz sold $435 million in seven-year junk bonds to finance the $820 million temporary and permanent casino projects. Those bonds were hit by a ratings downgrade last week by Moody’s Investors Service, which raised serious financial questions about the project.
Just two weeks ago, a former regulator warned that revenue projections from the temporary casino were so dismal that the partners would not be able to pay its debts even when it finished building the permanent casino.
State casino commissioner Fred Cassibry reported earlier this month that a source told him that Harrah’s had consulted with a law firm specializing in bankruptcy, an allegation that top Harrah’s Entertainment officials denied.
At that time, Harrah’s said the temporary casino would remain open and the permanent casino would be finished under a guarantee by Harrah’s Entertainment.