US banking giant Citigroup has initiated a lawsuit to recover £134m ($176m) it claims it accidentally transferred to creditors of the struggling cosmetics company Revlon.
The lawsuit was filed yesterday in the U.S. District Court, Southern District of New York (Manhattan). It specifically targets Brigade Capital Management, seeking the return of the hedge-fund manager’s share of nearly $900m that Citi says it mistakenly paid to Revlon lenders.
Go deeper with GlobalData
New York-based and global beauty company Revlon has been struggling with mounting losses and huge debt, more recently worsened by the Covid-19 devastating impact on American retailing.
The company had $415.7m of liquidity as of June 30, against a debt load of several billion dollars.
“An operational mistake”
As the administrative agent for the Revlon loan, Citigroup was in charge of collecting payments and communicating with the syndicate of lenders that provided the 2016 loan to Revlon.
But Citi was preparing to step down as the administrative agent when it accidentally wired roughly $900m to the lenders last week amid a bitter fight between the cosmetics company and creditors.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe bank says it meant to make interest payments on behalf of Revlon. However—due to “issues with the loan-processing system”—Citi says it transferred payments to each lender that were “on average more than 100 times the interest that was actually due.”
“When Citibank discovered the mistake, it promptly asked the recipients to return its money,” America’s third-largest bank said in the court filing.
“Sorry, but we’re keeping the money”
Brigade “has unlawfully attempted to capitalise on the mistaken payment,” Citi alleges in the complaint.
The hedge fund and other lenders have taken the position that they are not obligated to return the money.
Brigade was supposed to receive interest on a $174.7m loan, according to the complaint. It instead got $176.2m and has refused to repay the funds “despite crystal-clear evidence that the payments were made in error,” Citi said, noting that the money belonged to the bank, not Revlon.
Meanwhile, some of the parties that received the money have acknowledged the overpayment and returned it to Citi. Others have not yet responded, perhaps waiting to see what comes out of the lawsuit.
