Creditors Likely to Force Resorts Into Bankruptcy : Casinos: Merv Griffin’s company lost $81.5 million in the first nine months of 1989. Now the firm faces an involuntary Chapter 11 petition.

Merv Griffin appears to be losing his months-long battle keep his faltering casino company, Resorts International, out of bankruptcy.

Amid a backdrop of unexpectedly heavy losses, Resorts disclosed Friday that it is “likely” that some of its creditors would file a petition by Wednesday to force the firm into bankruptcy court.

If the creditors succeed, it would be a sharp setback for Griffin, the former talk show host who bought Resorts last year for $365 million following a long battle with Manhattan real estate developer Donald J. Trump. The company owns casino hotels in Atlantic City, N.J., and the Bahamas.

Resorts has been conducting talks since September to induce its bondholders to accept reductions in interest and principal on its long-term debt with a face value of more than $900 million. Citing a severe cash crunch, Resorts stopped the payments on those bonds in late August.

The bankruptcy filing is expected to be an involuntary Chapter 11 petition filed by the firm’s unsecured creditors, known as the junior bondholders, officials close to the talks said. If the petition is filed, Resorts has up to 20 days to answer it.

Forcing Resorts to operate under supervision of a bankruptcy court would endanger its gambling license with the New Jersey Casino Control Commission and further harm its business operations, Resorts officials fear. The firm’s casino license in New Jersey comes up for renewal in several months.

Resorts officials continue to believe that an agreement with its bondholders is within reach, but they are unsure about the timing, sources close to the talks said.

“Everybody now believes a deal is at hand,” an official close to Resorts said. “Whether it can be done (by Wednesday) is another question.”

The last few months have taken a heavy toll at Resorts. The firm also announced Friday that it lost nearly $35 million in the third quarter ended Sept. 30, bringing losses for the year to $81.5 million. Lower revenue and higher costs at the Atlantic City casino contributed to the red ink, the company said.

“We had been expecting losses, but I was a little surprised at the magnitude of them,” said Kay Handley, analyst for R. D. Smith & Co. in New York, an investment firm that specializes in distressed securities. “They were in a rush to get the figures out to show how bad the situation has become.”

The heavy losses occurred largely during the summer season in Atlantic City, which is supposed to be the best time of the year for the casino industry there. Atlantic City has 11 casinos, several of which are said to be in financial trouble.

“If you can’t make it in the third quarter, forget it,” said Marvin B. Roffman, analyst for Janney Montgomery Scott in Philadelphia. “This company has deep, deep problems.”

Griffin has been directly involved in talks with bondholders this week in New York. He was not available for comment, nor were Resorts’ other top officials. The talks are expected to continue into the weekend.

The Resorts investment has been a roller-coaster ride for Griffin, a 64-year-old businessman who made his name as a longtime talk show host and his multimillion-dollar fortune as creator of game shows such as “Wheel of Fortune” and “Jeopardy.”

At first, there was euphoria following a months-long takeover battle in which it appeared that Griffin had taken on Trump and fought him to a standstill. The pair ended the fight when they agreed to split up Resorts, with Griffin getting the operating properties in New Jersey and the Bahamas. Trump, who had been Resorts’ controlling shareholder, retained the huge but uncompleted Taj Mahal casino hotel.

But the euphoria vanished when it became painfully clear that Resorts had nowhere near the operating income or salable assets to pay its debts. Payments on its long-term bonds totaled more than $130 million a year, far in excess of its operating income.

Resorts’ talks with its bondholders are complicated because the creditors are a diverse group and reportedly cannot agree among themselves about Resorts’ proposal to lower the payments on its high-cost debt.

The creditors include the senior bondholders, most of whom are institutions whose investments are secured by Resorts’ assets, and the unsecured debt holders, many of whom are retirees and small investors who live in the New Jersey area.

The unsecured bondholders want to force an involuntary bankruptcy to meet a deadline of Nov. 15--Wednesday--because that marks the one-year anniversary of Griffin’s purchase of Resorts.

The junior bondholders need to file the petition by then if they are to retain their rights under New Jersey law to make a claim that the Resorts deal involved a fraudulent transfer of assets when Griffin bought the firm from Trump.

If the junior bondholders make such a claim, they would likely argue that the sale did not leave Resorts with enough resources to pay its debts.