The Louisiana Gaming Control Board of 2014 is a vastly different agency than was the state’s first board of gaming regulators, a well-intentioned but clueless bunch of political appointees who had little mastery of basic grammar much less knowledge of casino gambling.
From an office tower in downtown New Orleans, they held media-circus meetings, at which one invariably got the impression that shiny-shoed casino executives were putting one over on Louisiana taxpayers.
Two decades later, gaming regulators here are vastly more professional. More importantly, the political shenanigans that poisoned the early years of legalized gaming under then-Gov. Edwin Edwards have been removed from the process.
Still, one couldn’t help but get a feeling of déjŕ vu earlier this month, when Caesar’s Entertainment Corp. went before the board asking for help restructuring its corporate debt and came away with a deal that could sink a racetrack and a casino in north Louisiana.
On the surface, it’s easy to understand why the board went along with the request from Caesar’s, which has owned Harrah’s and all the gaming properties that bear that brand name since the mid-2000s.
Three of those properties are in Louisiana: Harrah’s New Orleans casino, Harrah’s Louisiana Downs in Shreveport and Horseshoe Bossier City Casino. All are technically owned by a grossly overleveraged subsidiary of Caesar’s called Caesar’s Entertainment Operating Co., which is $19 billion in debt.
As part of a plan to stop the bleeding, the corporation has created a new subsidiary, Caesar’s Growth Partners, into which it is transferring, through asset sales, its best-performing casinos. The smaller and weaker ones are left to fend for themselves in CEOC, as it continues its downward spiral toward bankruptcy court.
So it was that Caesar’s went before the gaming board seeking permission to transfer Harrah’s New Orleans into the viable, solvent CGP. The Canal Street gambling hall is one of the crown jewels in the Caesar’s empire—who knew?—and has “certain capital needs that CEOC is unable to make,” as Caesar’s executives said. Among those: a second, swanky, downtown New Orleans hotel.
That’s all well and good. The problem is that Louisiana Downs and Horseshoe Bossier City remain stuck in CEOC, along with some Indian casinos and smaller-market properties that may not be as sexy or lucrative as is Harrah’s New Orleans but are financially viable and very important to the communities in which they are located.
North Louisiana members of the state gaming board—charged with looking out for the interests of those communities—seemed not bothered by this, though board Chairman Ronnie Jones was, at least at first. He put Caesar’s off for a month when it first floated the request in April.
But Jones has since talked to Caesar’s brass and been persuaded by them that they are not going to hang Horseshoe or Louisiana Downs out to dry.
“They reiterated their commitment to those properties,” Jones says. “I have every reason to believe those properties are secure.”
Bondholders aren’t so trusting. They have more on the line than the gaming board and argued that the precarious financial position of CEOC could cost Louisiana jobs and tax revenues. They see the writing on the wall and don’t believe Caesar’s will reinvest in CEOC properties and give them what they need to stay competitive.
Only time will tell if Caesar’s honors its commitment. But it’s clear that if it doesn’t, north Louisiana will be the big loser in this shell game. It’s also clear casino executives can still talk circles around gaming regulators in Louisiana.
