Citi Widens Hunt for Revlon Loan Payments as Lenders Question Mistake
By Becky Yerak and Alexander Gladstone
Citigroup Inc. widened its effort to claw back money it wired to
Revlon Inc. lenders, suing more investment firms that say they
don't believe a major financial institution sent them portions of a
$900 million payment by mistake.
The bank said it wrongly sent $127.3 million to HPS Investment
Partners LLC and $109.7 million to Symphony Asset Management LLC
and wants a New York federal court to force them to return the
money. The bank has blamed human error for the transactions, which
fully paid off a loan issued by Revlon in 2016 out of the bank's
Citi had already sued Brigade Capital Management LP and on
Tuesday won a temporary restraining order freezing the hedge fund's
share of the loan payment, roughly $175 million.
Brigade, HPS and Symphony aren't conceding there was a mistake,
suggesting the payment may have been intentional and questioning
how Citi could have transferred such a huge sum in error.
In a court hearing Wednesday, Brigade lawyer Ben Finestone said
the payment recipients should get a look at any documents Citi has
produced for the Office of the Comptroller of the Currency and the
Federal Reserve as the bank investigates the matter.
Citi lawyer Matthew Ingber said it is unthinkable that the bank
would intentionally make hundreds of millions of dollars in
payments to the lenders out of its own pocket. The bank is weighing
its options against other lenders keeping the money, including
additional lawsuits, he said.
In court papers, Citi said it intended to pay the lenders
interest due under a loan issued by Revlon in 2016 but that issues
with the loan-processing system caused the full principal amount to
be accidentally wired.
HPS Investment and Symphony have taken the "baseless position"
that Citi's overpayment "served to pay off Revlon's entire
principal balance, " the bank said.
Revlon, which had $415.7 million in liquidity as of June 30, has
said it didn't pay the money itself. The overpayments were made
with Citi's money, not Revlon's, according to the bank.
Citi said the overpayment was discovered during its daily cash
reconciliation process. It notified the lenders after realizing the
mistake, according to the complaint.
Brigade, HPS Investment and Symphony have been at odds with
Revlon over financial maneuvers that moved intellectual-property
assets out of their reach. Citi, as the administrative agent for
their loan, was also caught up in the dispute.
Revlon has been shifting brands including American Crew,
Elizabeth Arden and others to new subsidiaries and pledging the
assets as collateral to other creditors since last year, raising
financing to stay afloat.
The lenders, acting through agent UMB Bank NA, last week
launched a lawsuit against Revlon, Citi and others over those
transactions, alleging they breached their lending agreements and
demanding the moves be unwound.
Revlon has struggled with billions in debt, and more recently,
headwinds stemming from the coronavirus pandemic's hammering of
Citi said there should be little doubt that the payments to the
lenders have been made in error.
"Some of the best evidence is that not every lender who received
an erroneous payment pocketed the money," the bank said.
In court papers and in court proceedings, Brigade has said some
lenders aren't buying Citi's "bald assertion that the wires were
sent in error" and they should be able to presume that the payments
they receive are correct without having to perform a forensic
Write to Becky Yerak at firstname.lastname@example.org and Alexander
Gladstone at email@example.com
(END) Dow Jones Newswires
August 19, 2020 14:09 ET (18:09 GMT)
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