Citigroup asks Court of Appeal to allow it to recover $ 504 million lost due to pre-payment error on Revlon loan


On Wednesday, Citigroup Inc. lobbied a federal appeals court to allow it to recover around $ 504 million from its own money that it accidentally wired to Revlon Inc.’s lenders, claiming its mistake did not give them back. entitled to a huge windfall.

Bank attorney Neal Katyal said lenders had six “red flags” of the error and did not expect the cosmetics company controlled by billionaire Ronald Perelman to pay them off for three years.

“If you press rewind here, it’s not unfair,” Katyal told the 2nd US Court of Appeals in Manhattan. “The parties are returning to the position they negotiated. “

But a member of the three-judge panel said that a key precedent from New York State’s highest court appeared to leave unanswered legal questions about Citigroup’s payment and the lenders’ response, and to which this court should can. -be answer first.

“Each of these issues is really a matter of politics,” said circuit judge Pierre Leval. “We would largely guess.”

The case stems from the early repayment by New York-based Citigroup in August 2020 of an $ 894 million loan to Revlon, which lacked cash to repay it, and was not due until 2023.

Rather than return their share of the money, 10 asset managers whose clients included Revlon lenders kept it.

They said Citigroup, acting as Revlon’s loan agent, paid exactly what was owed and that they had no reason to believe that a sophisticated bank would be so seriously wrong.

Asset managers included Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, among others.

On February 16, US District Judge Jesse Furman ruled against Citigroup, saying the prepayment was a “value discharge,” and that asset managers were unaware of Citigroup’s blunder.

These managers deserve “the finality,” their lawyer Kathleen Sullivan told the appeals court.

She also said the prepayment seemed plausible because Perelman had already bailed out Revlon.

“They had seen it before,” she said.

But Katyal said the banking industry transfers $ 5.4 trillion every day and mistakes will happen.

Industry groups have said a ruling against Citigroup could expose banks to excessive liability risks and destabilize the US syndicated loan market by around $ 1.2 trillion.

The case is In re Citibank August 11, 2020 Wire Transfers, 2nd US Circuit Court of Appeals, No. 21-487.

(Report by Jonathan Stempel in New York Editing by Nick Zieminski)

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