Asbestos-Free Provision Holds Up Wrather Loan

The Wrather Corp. said that a $100-million loan from the California Public Employees Retirement System to refinance debt owed on the Disneyland Hotel has fallen through because Wrather was unable to satisfy a requirement that the hotel be asbestos-free. Asbestos is a known carcinogen.

The loan would have been used primarily to pay off $68 million borrowed from the retirement fund in 1981, said Roy M. Rawls, the Beverly Hills developer’s chief financial officer. The early loan carries an annual interest rate of 14.5%, while the new loan would have been at only 9.5% a year, he said.

Although the additional money isn’t needed for a planned expansion of the 1,174-room hotel, the refinancing would have saved Wrather about $2.5 million a year in interest expenses, Rawls said. “Everybody has been refinancing and we just wanted to get in on it,” he said.

Officials of the Sacramento-based retirement fund could not be reached for comment.

The asbestos-free requirement was not a provision of the 1981 loan, Rawls said. While tests show that the 31-year-old hotel meets safety standards, it cannot be rendered asbestos-free, because of its age, Rawls said. “It’s really an impossible requirement,” he said.

And while Wrather is considering other lenders, the 1981 loan cannot be prepaid before 1993--except with additional PERS funding. The company now is attempting to persuade the retirement fund to waive that provision of the old loan, Rawls said.