Resorts deal lightened Merv's pocketbook; Griffin gave up 78 percent of company.

Resort deal lightened Merv's pocketbook; Griffin gave up 78 percent of company

In the high-stakes game of bankruptcy resolution, bunches of wealth -- on paper or otherwise -- can evaporate overnight in a bad deal, as entertainer Merv Griffin, former owner of Resorts International Inc., has found out for himself.

Last month, Resorts emerged from Chapter 11 and went public, walloping Merv in the pocketbook, and removing him as the owner.

On paper, Merv has lost $713.7 million from his high-flying days in 1988, when he outbid The Donald, as in Trump, for the Atlantic City-based gaming company.

Last week Forbes reported that Griffin, 65, lost an estimated $50 million during the last 12 months, but his estimated worth is still $250 million. Griffin originally made his bundle by selling the syndication rights to the Wheel of Fortune and Jeopardy game shows, which he created and produced.

Resorts was valued at $915 million when Merv bought it. He put $50 million down to own 100 percent of Resorts stock, using junk bonds to finance the balance of his purchase.

In Chapter 11, Merv was forced to give up 78 percent of the company -- which once would have been worth $713.7 million -- to bondholders. They got newly issued stock, which is now traded on the American Stock Exchange.

Merv, who recently halted plans to build a 50,000-square-foot mansion in Beverly Hills, also agreed to inject $28.5 million into Resorts in the next two years.

The ex-talk show host may have taken it hard, but he also took it quick. For a company the size of Resorts, emerging from bankruptcy in less than a couple of years is almost unheard of.

"This one was really a record-breaker in the sense that you had a billion-dollar restructuring that was accomplished from start to finish in about nine months," said Tom Gallagher, an attorney with the Los Angeles-based law firm Gibson, Dunn & Cruucher. A large bankruptcy usually takes two to three years, he said.

The restructuring process went so fast because most of the deal was agreed upon before Resorts went into bankruptcy in December 1989. About 90 percent of the parties involved agreed upon a deal beforehand, said Art Newman, an advisor to the bondholders and managing director of Chemical Bank in New York.

Most of the parties came out of the deal reasonably satisfied, the attorneys said.

"The deal we got was the deal we negotiated for," said Wilbur Ross, an advisor to the bondholders, senior managing director at Rothschild Inc. in New York.

In all, there were six groups of Resorts bondholders, four holding issues of subordinated debt and two holding issues of secured debt.

As a result of the restructuring, the subordinated debtholders received 75 percent of the company's stock, some restructured secured debt, and took control of a war chest which will be used to sue Donald Trump. The New York real estate magnate stiffed Merv in the sale of Resorts, some bondholders allege.

The secured debt holders received only 3 percent of the company's stock but got $430 million in mortgage bonds.

The secured bondholders are not interested in owning a big portion of Resorts stock because they anticipate a recession in the Northeast and are less optimistic about the Atlantic City economy, Ross said.

Marc Kirschner, attorney with Jones Day Reavis & Pogue in New York who represents subordinated debtholders, added that he was "very pleased" with the outcome.

To Resorts, the emergence from bankruptcy was expected.

"Coming out wasn't a surprise," said Christopher Whitney, executive vice-president of Resorts. "We set an aggressive schedule and everybody's combined efforts got us there."

Griffin's zeal was also praised.

"Both Merv and the majority of the company were pushing hard to get the company out of bankruptcy and out on the road," Gallagher said.

The parties involved hustled because the longer the company stayed in bankruptcy, the more difficult it would be to get out.

There was one Atlantic City casino that dallied about in bankruptcy, and then never emerged from insolvency, Gallagher said.

Griffin also plans to sell Resorts' holdings in the Bahamas within a few years, Whitney said.

During the second quarter of 1990, Resorts earned $803,000 on revenues of $109.1 million compared to a loss of $27.9 million on revenues of $110.2 million during the second quarter of 1989.