Hilldun’s Wassner Tells Clients Not to Ship Saks, and His Firm Is Not Approving Orders

Updated 4:42 p.m. ET Jan. 7

Gary Wassner, the chief executive officer of Hilldun Corp., the factoring and finance company, wrote to his clients Tuesday afternoon that it still can’t approve Saks Global orders at this time and they should continue to avoid shipping the retailer.

In the letter, which was obtained by WWD, Wassner wrote that his company hasn’t received any payments from Saks Global since Dec. 19, and he has had little correspondence with anyone there since chief executive officer Marc Metrick left late last week.

“For the first time in the past two years, we are sitting here in the dark. We do not know if payments will resume,” warned Wassner.

Underscoring the financial squeeze at Saks Global, Standard & Poor’s cut its credit rating on the retailer to “selective default” from “CCC” after it missed a more than $100 million interest payment on Dec. 30.

The company has been missing quite a few of its bills — before and since buying Neiman Marcus Group just over a year ago.  

“Overdue payments resulted in vendors withholding inventory, disrupting Saks Global’s supply chain and leaving it with insufficient in-stock inventory to operate successfully,” according to S&P.

“We do not believe the company will make the payment within its 30-day grace period given its ongoing liquidity issues,” the rating agency said. “Its inability to monetize assets in a timely manner have exacerbated liquidity issues. In our view, operational challenges, a [$410 million free operating cash flow] deficit, and unsustainable capital structure have prevented Saks Global from fully realizing synergies from the acquisition” of Neiman Marcus Group.

Since Hilldun represents so many vendors of Saks Global, Wassner said: “It’s critical that we learn soon how to advise you all to proceed. And it’s critical to the future of Saks Global that we provide you with the safety net you need to begin shipping again. But at this moment in time, we are at a standstill.”

He said that spring shipments to other retailers have begun, and he has advised clients that what they have produced for Saks Global “must remain on your shelves until Saks’ future financing is resolved.”

Reached for comment Wednesday, Wassner told WWD, “I want nothing more than to be able to approve our clients’ spring orders, so they can ship the inventory that they’ve accumulated in their warehouses for Saks Global. But until I am advised on how the company will be moving forward, I cannot do anything.  My hands are tied.  We represent over 100 brands who supply Saks Global.  Until we guarantee to our clients that their invoices will be paid after they ship, they cannot take the risk of not being paid after shipping unapproved orders.  We own the invoices once they are shipped, and we are paid directly by Saks Global for those invoices. 

“Many of our clients borrow from us using those shipped invoices as collateral for the loans we make to them.  So until I am comfortable that a plan has been put into place that will facilitate payment by Saks according to the payment terms on the orders themselves, I cannot provide those guarantees,” Wassner told WWD. He said that as of Wednesday he hadn’t heard a word from Saks.

In the letter, Wassner wrote, “For everyone’s sake, and for the health of the fashion industry in general, we hope a resolution is reached sooner rather than later. All I can suggest now is that you wait to make decisions regarding your future orders from Saks Global, as well as your current inventory, for another week to 10 days, if you can. Hopefully, we will learn something by then that will assist in our decision making.”

Wassner wrote that he’s aware that this will impact his clients’ cash flow, “and I am also aware that the later your product hits the selling floors, the less likely it will achieve a full price margin. But no other options will preserve your margins now. Other retailers are hovering, but they will all expect discounted pricing,” he said.

“So sit tight if you can, and we will keep you as informed as legally possible, should Saks Global provide us with any guidance or make any major announcements,” he said.

Wassner said he was writing this letter because he has received hundreds of emails daily regarding the situation, and felt it was more efficient to send an email.

“The press is flooded with rumors of a potential bankruptcy, a sale of equity, a refinancing, a purchase by Amazon, and other possibilities. The imminent reality is that Saks must find a path forward, and we just don’t know where that path will lead the company,” wrote Wassner.

He said he realizes that most of his clients are sitting with unshipped inventory from holiday/resort, as well as both finished inventory for spring deliveries and work in progress for spring. “The impact on both small and large brands is significant, and in some cases devastating,” he said.

Wassner said he would love to be able to approve orders now, and for clients to begin safely shipping, as they have done for at least the past 18 months, “through thick and thin.”

“But until Saks Global works through this very complicated process of setting their course for the future, we are deadlocked,” he said.

That said, Wassner wrote that he’s still committed to the belief that Saks Global has the most opportunity of any retailer in this category. “In fact, it is really the ONLY retailer fully in this category. I want it to succeed.” He acknowledged that the negotiations going on between Saks and its various partners and lenders “are complicated and delicate” and he understands why they cannot reveal these confidential negotiations to the press or the trade or to them. “I am also certain that if they don’t come to a resolution soon, their chances of recovering intact become more challenging daily,” he said.

As reported in WWD on Dec. 9, Hilldun put Saks on the “do not approve” list due to their skipping two weeks of payments. The retailer has been on the hot seat for slow and past-due payments to vendors for more than a year.

Richard Baker, chairman of Saks Global, last week took the reins as CEO from Metrick, shortly after the company fell behind on its debts, reportedly missing a more than $100 million interest payment on Dec. 30, as reported.

As WWD reported Wednesday, while many people see a Saks Global bankruptcy as a fait accompli, Baker “is known as a kind of dealmaking magician who could still pull something out of his hat.”

Spokespeople for Saks Global did not immediately respond to a request for comment on Wednesday afternoon.

The back-and-forth with vendors is something Saks Global has had to deal with repeatedly over the past year — writing letters to brands, calming nerves with reassuring phone calls, trying to temper the cocktail party rumor circuit and in the courts. 

While it doesn’t appear any cases have played out all the way to a final decision from a judge or jury, a close look at state and federal dockets show the retailer has been busy in the legal sphere dealing with allegations from vendors, including nonpayment. 

Here, a sampling: