Dail future hangs in the balance for Wallace as woes grow
THE day after Mick Wallace declared he was standing for the Dail, he went to a match of his beloved Wexford Youths FC, having made history as the first candidate to contest a general election with a €40m debt.
He took a call from the Sunday Independent from the side of the pitch, with the wind whistling down the phone.
The big question was money and Mr Wallace was upfront. "My main loans are with ACC, Ulster Bank and Bank of Scotland (Ireland). I have problems with all of the banks.
"Listen, it's very possible my business will not survive. I am trying to do my bit to make it survive. I have been fighting since September 2007," he said. Unless he could make ends meet and pay the bills, he would "perish". He wished that the same principle of pay or perish would apply to the banks.
He went on to top the poll in Wexford but his fears have come to pass and now this Italian-loving, football-mad, property developer's fledgling political career is at the mercy of the banks he has been criticising for so long.
Last Monday, ACC -- one of his biggest creditors -- gave him less than 24 hours to come up with the €18.5m it claims he owes it. The following day, Declan Taite was appointed as receiver to three key Dublin properties owned by his main company, M & J Wallace Ltd: the Italian Quarter development on Ormond Quay; the Behan Square apartment complex on Russell Street, near Croke Park; and development land in Rathgar.
Now that ACC has moved against Mr Wallace, it remains to be seen whether the other banks will follow suit. His family home on Dublin's seafront is at risk because of personal guarantees he gave against his debts. If the banks see fit to pursue him, he could in theory be bankrupted, which would force him out of the Dail (the 1992 Electoral Act bars bankrupts from holding office).
Mr Wallace has been perhaps understandably reticent about his latest troubles. He appeared briefly on Mary Wilson's Drivetime radio show, hours after a receiver was appointed, with the philosophical response: "It's rough, Mary, but that's life", and continued to present for duty in the Dail, voting against the finance bill on Thursday.
According to one source, he also devoted a good part of his week to reassuring the 50 or so staff in his Italian wine bars, the handful in his construction business, and those involved in the project closest to his heart, Wexford Youths FC, the minor soccer team he hauled into the first division.
Mr Wallace is a director of more than a dozen companies, worth €70m at the height of the boom and €20m at his last count. M & J Wallace Ltd is his main development business, and his son, Sasha, is his co-director. Separated for many years, he lives with his sons on Clontarf Road in Dublin.
There was more than a hint of Schadenfreude when a number of high-living Celtic Tiger developers hit the rocks with the property collapse. With his anti-establishment activism and heavy metal hair-do, he gave the impression that he was on a different playing field altogether.
He is a philosophy graduate who revived his father's construction company in Wexford. He accumulated the profits of this distinctly capitalist enterprise while using his construction sites to hang banners condemning the Nice Treaty and the Iraq war.
Most of Ireland came back from Italia '90 with a hangover. He returned with a love of Italy that inspired him to buy an apartment in Turin, acquire his own vineyard and to develop the popular 'Italian quarter' on Dublin's Ormond Quay.
The logo on his company vans is a football and the words "work hard, play hard". He spent millions building a home for Wexford Youths FC, the team he coached for decades, in Crossabeg, complete with state-of-the-art pitch, floodlights and training centre.
Mr Wallace has made no secret of his financial difficulties, while other developers remain silent. He revealed two years ago that he wasn't paying any interest on his bank loans and neither were any of his competitors.
He has spoken in the Dail about his difficulties in dealing with the banks, dating his troubles back to September 2007. In March, he spoke of his serious financial difficulties and said that he owed sub-contractors €1m -- which he was "unhappy about".
Despite those difficulties, the prevailing view last week was that ACC's action took Mr Wallace by surprise. In recent months, he was preparing the latest accounts for his company. The figures were unlikely to be an improvement on the previous year. The last set of accounts for 2008 showed the company owed the banks €42.7m, lost €2.67m during the year, wrote down assets by €2.12m and had shareholder funds of more than €13m.
Mr Wallace and Sasha paid themselves €289,605 during the year -- although he has said in the past that whatever salary he gets goes on repaying his various mortgages with four banks -- the smallest of which is with AIB.
He told Wilson last week: "I had my hand up over three years ago now about money owed. I've been working with four different banks since then. I had a lot of properties I couldn't sell. I was renting . . . I was giving the rent to the banks. And, sure, I was hoping that the banks would continue to work with me through it. But one bank has obviously changed its position."
He was able to repay the interest on some of the loans using the rental income generated by the apartment complex on Russell Street and the Italian Quarter buildings occupied by his wine bars. But the third site in Rathgar was "dead in the water" and didn't generate a cent. ACC was charging him 20 per cent interest on his non-performing loans since January 2009, "which, I'm sure you'll agree, is draconian", he said.
ACC's patience ran out. "They asked for €18.4m last Monday within 24 hours. But a lot of that, you'll understand, is interest." According to Mr Wallace, ACC -- and Rabobank -- want developers "out of their hair".
He admitted that he gave personal guarantees on "just about everything", which could put his family home and other family properties under threat, but he didn't expect to be made bankrupt: "It would actually cost them money to bankrupt me. But if someone does bankrupt me, it would have more to do with badness than financial sense."
Aside from his RTE interview, his only other public pronouncement was a short statement on Thursday evening to clarify that M & J Wallace was still in business.
"The company has dealings with four of the major banks and continues to work with the remaining three. Wallace Calcio, which runs the wine bars and coffee shop, is a separate company and is not affected by the action of ACC Bank.
"Likewise, the Wexford Youths football club, based at Ferrycarrig in Wexford, is leased from the construction company and its survival is protected by that same lease," the statement said.
However, his wine bars lease their premises from M & J Wallace. Those premises are now in the hands of the receiver, who could hike up the rent or sell.
The football club's survival is tied to M & J Wallace. The company accounts for November 2009 note that Wexford Youths FC is "dependent on the continuing support of its parent, M & J Wallace, for its existence", having use of Ferrycarrig free of charge and an interest-free loan of €170,000.
According to economist Jim Power's assessment, foreign-owned banks are more aggressive than their domestic counterparts in pursuing debt. The biggest threat to Mr Wallace's empire now is that ACC's move could have a domino effect.
"If one bank moves by putting part of the business in receivership, it can become a situation where there is no choice for other banks but to follow suit. Once it starts, the others follow, to secure their assets," he said.
He believed bankruptcy was less likely, because it was still "a fairly drawn-out process" entailing probably significant legal costs.
If Mr Wallace's loans had transferred to Nama, it's possible that he would have been allowed to work through his difficulties.
However, he borrowed mostly from foreign-owned banks that are not covered by the bank guarantee. But that would be against his principles. As he told the Dail last month: "If my business goes down, I don't want anyone to bail me out."