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EXHIBIT 99.2
CONFIDENTIAL
LONG TERM RESTRUCTURING PLAN TERM SHEET
The following points outline the fundamental agreements that must be
accomplished with all parties with financial interests in Jazz Casino Company
LLC and its parent company JCC Holding Company (collectively "JCC"), including
the bond and equity holders, Harrah's Entertainment, Inc ("HET"), the banks, the
State of Louisiana and the City of New Orleans. There must be agreement (and
execution of all required documentation) by all impacted parties on all of these
issues by March 31, 2000 to establish the land-based casino as a financially
stable business over the long term.
I. STATE ISSUES
o EQUITABLE STATE FEE -- Authorize LGCB to enter into amendment to the Casino
Contract with JCC reducing the net gaming fee (tax) and related annual
minimum payment to the greater of the amount of the tax that the Louisiana
riverboats pay up to 21 1/2% on gross gaming revenues (currently 18 1/2%)
or $50 million for the first year after the restructuring, $55 million in
year two and $60 million in year 3 and each year thereafter (the "Minimum
Payment"). The Minimum Payment levels are contingent upon accomplishing all
provisions of the Plan as set forth in Sections II to V below. If these
issues are not dealt with as set forth herein, there will need to be a
lower minimum payment if the business is to be viable.
o THIRD PARTY GUARANTY - In order to create recurring revenue for the State
general fund, require JCC to obtain a third party guaranty of the minimum
payment for every three year period. The requirement for the third party
guaranty shall not be required when and if gross gaming revenues exceed
$350 million. The guaranty is predicated on the implementation of all of
the requirements set forth in Sections II to V of this Term Sheet.
o STATE UPSIDE OVERRIDE - In addition to the 18 1/2% fee set forth above, JCC
shall pay an override fee equal to the percentage of gross gaming revenues
as follows: (i) 1 1/2% for gross gaming revenues in excess of $500 million
up to $700 million, (ii) 3 1/2% for gross gaming revenues in excess of $700
million up to $800 million, (iii) 5 1/2 % for gross gaming revenues in
excess of $800 million up to $900 million, and (iv) 7 1/2% for gross gaming
revenues in excess of $900 million.
II. FOOD ISSUES - In order to compete with Mississippi casinos and the
riverboats and to stimulate revenue, certain of the food restrictions must
be lessened.
o EXPANDED SEATING AND A SINGLE RESTAURANT - Under the Gaming Act, JCC cannot
offer seated restaurant facilities, but may offer a cafeteria style buffet
with 250 seats and may have public food offerings from local food preparers
(at retail) as allowed by regulation (currently limited to food kiosks).
JCC proposes amending the Gaming Act to allow (i) the expansion of the
buffet by 200 seats to 450 seats; (ii) a 200 seat restaurant to be operated
by JCC; and (iii) 100 seats to be utilized in the kiosk areas whereon
seating is currently
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prohibited. This increase in seating will account for less than 1% of seats
currently available in New Orleans restaurants.
o DIRECT CATERING OF EVENTS - Under existing regulations, JCC cannot directly
cater special events in the ballroom, any special events center or in VIP
areas, but rather, must contract with local food preparers at retail prices
which makes many events cost prohibitive. JCC proposes amending the Gaming
Act to allow it to directly cater ballroom and other special events.
o LIMITED DISCOUNTING - Under the Gaming Act and the regulations, no food
prepared by JCC (including the buffet) may be given away or subsidized
within the casino. JCC proposes to amend the Gaming Act to allow a limited
exception to the "give away/subsidy" restriction by allowing
discounting/comping of food for Harrah's player club members, "Total Reward
Card customers", and to other targeted markets, provided that such
discounting is only focused on such groups and not offered to the general
public through mass media (newspaper, television, radio). Such restrictions
shall not apply to national marketing outside of the local market.
o NIGHT CLUB/CASUAL DINING FOOD ON THE 2ND FLOOR - Under existing law, there
are limitations on JCC's use of space on the non-gaming 2nd floor (either
directly or indirectly through third-party leasing) for purposes that
involve food offerings and seating. JCC proposes changes to the law to
allow JCC to lease and/or directly use space on the 2nd floor for casual
food offerings in night clubs, lounges and dinner theatres which will be
necessary to attract development of the 2nd floor space.
III. HOTEL - Also, as part of the restructuring, JCC needs to own and operate a
hotel without restrictions in order to be able to bring in new "casino"
tourists to the City which will benefit all.
o HOTEL ROOMS - Under the Gaming Act, JCC is permitted to own and operate
unlimited hotel rooms so long as such rooms are not within the casino
facility. JCC does not propose any changes to this requirement.
o REMOVAL OF SIMILARLY SITUATED REQUIREMENT - Under the Gaming Act, JCC may
not enter into any business relationship to give any hotel, whether
affiliated or not, any advantage or preference not available to all
similarly situated hotels and all such contracts must be approved by the
Gaming Board. JCC proposes amending the Gaming Act to allow hotel
relationships, rates, services and the like to be market driven and, in
that regard, proposes removal of the "similarly situated" requirement and
the Gaming Board approval requirement.
IV. FINANCIAL RESTRUCTURING -- Coupled with the change to a financially
feasible tax, a financial restructuring of the capital structure is
critical to the long term viability of JCC. To accomplish the
restructuring, the pro forma debt structure of JCC will need to be reduced
by approximately $500 million which will need to be written off by HET, the
bondholders and the banks. Set forth below is the proposal of JCC for the
restructuring:
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<TABLE>
<CAPTION>
WORKING CAPITAL ESTIMATED 3/31/01 PRO FORMA 3/31/01
----------------- -----------------
<S> <C> <C>
RESTRICTED/ CAGE CASH ............. $ 20.0 $ 20
AVAILABLE CASH .................... -- --
LINE OF CREDIT AVAILABLE .......... -- 22
------------ ------------
TOTAL WORKING CAPITAL ............. -- $ 42
============ ============
DEBT
NEW REVOLVER ...................... $ -- $ 8.0
NEW CLASS A DEBT .................. -- 61.6
NEW CLASS B DEBT .................. -- 60.0
HET MIN. PAYMENT OBL .............. 61.6 --
TRANCHE A-1 2006 .................. 10.0 --
TRANCHE A-2 2006 .................. 20.0 --
TRANCHE A-3 2006 .................. 30.0 --
REVOLVER .......................... 25.0 --
TRANCHE B-2 2006 .................. 30.0 --
TRANCHE B-2 2006 .................. 121.5 --
SENIOR SUB. NOTES 2009 ............ 216.7 --
CONV. JR. SUB. NOTES 2009 ......... 31.9 --
HET JR. SUB DEBT .................. 25.2 --
HET COMPL. LOAN ................... 8.0 --
HET LOAN TO JCC DEVELOP ........... 1.7 --
HET DEFERRALS ..................... 40.7 --
------------ ------------
TOTAL DEBT .................... $ 622.3 $ 129.6
</TABLE>
O GOAL/INTEREST COVERAGE RATIO - The goal of the restructuring is to put JCC
in a position where its interest coverage is at least 2 x Earnings Before
Interest, Taxes, Depreciation, Amortization and Management Fees.
o FINANCIAL CONCESSIONS BY LENDERS - To accomplish this result, the
bondholders, banks, HET and others all will be required to participate in
an approximate $500 million debt reduction. Negotiations concerning the
proportion of the debt reduction to be borne by the parties are underway.
o CONCESSIONS BY EQUITY HOLDERS -- The current equity holdings will be
eliminated. The new stock will be issued to the existing secured lenders in
return for the concessions set forth above. Upon the restructuring of JCC,
the equity holdings will consist of two principal groups with the
bondholders holding a majority over 50% and the other secured lenders (HET
and Deutsche Bank) holding the bulk of the remaining equity.
o MANAGEMENT FEES -- To further assist in the restructuring, JCC and Harrah's
are in negotiations to alter the compensation due on the Management
Agreement from a gross revenue based formula to a
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combination of a lower percentage of revenue and incentive based earnings
formula, which amounts will only be paid after the 18 1/2 % gaming fee due
to the State has been made.
o VENDORS - The proposed restructuring will not impact trade creditors with
no disruption in vendor payments.
o EMPLOYEES - If the restructuring is agreed to by all parties and put in
place by March 31, 2001, employment disruption can be avoided.
V. CITY ISSUES -- To assist the restructuring, the City will analyze
appropriate Lease modifications and other payment adjustments as may be
negotiated between the City and State.
