Column Financial, a commercial mortgage subsidiary of Credit Suisse, filed a petition Thursday with the state Casino Control Commission asking permission to foreclose on the casino, which has not paid its mortgage since October.
Failing that, Column Financial wants the owners, affiliates of Colony Capital LLC, to surrender the title to the casino.
Column would keep the casino open while searching for someone to run it.
"This is a sad, unfortunate consequence of the economy," said Joe Weinert, a casino analyst with Spectrum Gaming Group. "It could be the first of several casino failures across the country."
Resorts' owners have not kept pace with the rest of the market in terms of investing in and upgrading the property, said Weinert. "When you have that situation, piled on by the uncontrollable effects of the economy right now, that breaks the backs of the most vulnerable operators. This could be the first of several casino failures across the country."
The gambling industry's problems extend well beyond Atlantic City.
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Revenue for casinos across the U.S. dropped $1.1 billion, or 3.6 percent, to $30.2 billion in the first 11 months of 2008 compared with the same period in 2007, according to the American Gaming Association. In Atlantic City, the decline was 7.6 percent for all of last year.
Messages seeking comment from Colony Capital were not immediately returned Thursday. Their lawyer, Gil Brooks, declined comment. Paul O'Gara, a lawyer for Column, also declined comment.
Resorts said in a filing with state regulators that it was unable to make its November payment on a $10 million loan that is backed by a $360 million mortgage on the property, "due to the extreme impact of the current economic conditions."
Resorts was the first casino in New Jersey, opening in May 1978. Its revenues were down more than 16 percent last year as it struggled to compete with bigger, newer casinos.
It has 942 hotel rooms -- less than half of what is generally considered enough to successfully compete in Atlantic City today. The most successful casino hotels, including the Borgata Hotel Casino & Spa, and Harrah's Resort Atlantic City have about 2,000 rooms.
They also cater to a younger crowd, and promote themselves as hip, cutting-edge destinations to stay for several days. The Borgata has celebrity restaurants, a luxurious new hotel addition called The Water Club, and often lands the biggest concert and comedy acts. Harrah's continues to do big business with its huge indoor pool.
By contrast, Resorts caters to an older crowd, many of whom ride the bus to gamble for a few hours, then go home. One of its main attractions is its nightclub, Boogie Nights, which features '70s disco music.
For the year, Resorts won $233.2 million from gamblers. The only casino that won less last year was Trump Marina Hotel Casino, which is being sold this spring.
In contrast, the Borgata's revenues were $738.7 million, and Harrah's took in $544.7 million.
The only one of Atlantic City's 11 casinos that saw a bigger drop in revenue last year was Resorts' sister property, the Atlantic City Hilton Casino Resort, where revenue was down 18.3 percent.
The Hilton, though owned by the same company, is not included in the foreclosure action sought by Column Financial.
Resorts is just one of several casinos in the nation's second-largest gambling market to struggle financially. The Tropicana Casino and Resort has been operating under a state conservator for more than a year, and a proposed sale to a Baltimore developer has been called into question because the Cordish Company has lowered its offer for the casino, citing the continued poor economy.
The three Atlantic City casinos owned by Trump Entertainment Resorts got a two-week extension on Wednesday on talks with their bond holders, who could force the company into a third bankruptcy filing if a new deal is not reached to restructure $1.25 billion in debt.