Transfer of nearly a billion dollars is the biggest screw-ups of Wall Street
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Citigroup transfers $900m to Revlon lenders in error on behalf of the cosmetics company and claimed it was a ”clerical error” and wants its money back.
Some hedge funds claimed Revlon was in default and reportedly denied giving Citigroup the money back. The $900m is reportedly similar to the amount Revlon’s lenders were seeking through a lawsuit.
This clerical error has plunged Citibank into a battle between the Perelman Empire and a corps of sharp-edged investment funds that have become its impatient creditors.
One financier involved likened the surprise payment to find a fortune on the sidewalk. Several hedge funds who claim Revlon was in default on the loan were showing no signs that they’ll be giving Citigroup its money back.
A spokeswoman for Citi declined to comment. A representative for Revlon said in an emailed statement that Revlon itself didn’t pay down the loan, or any portion of it.
The legal battle between Revlon and a group of lenders who sued the cosmetics company and demanded immediate repayment of a term loan that Revlon has come due in 2023. Working with UMB bank, the lenders are claiming that Revlon shifted some intellectual property rights that had been backing their loan into collateral for new debt. The Lenders, including Brigade Capital Management, Symphony Asset Management, and HPS Investment Partners are seeking a court order forcing the return of the collateral, which includes brand trademarks, Citi, the administrative agent on the loan was also named as a defendant in the lawsuit, although it was in the process of resigning from the agent’s role. Around a similar time the lawsuit was filed, the nearly $900m – an amount equal to the full principal value of the loan, plus accrued interest landed in the lenders’ bank accounts Now, Brigade, Symphony, and HPS are among those that are refusing to hand the cashback.
Revlon said it would fight UMB’s “meritless” lawsuit and that the bank doesn’t have standing to sue because it’s not the agent on the loan and said, “This group of lenders has reportedly resorted to baseless accusations in an attempt to enrich themselves and hurt the company by blocking Revlon from exercising its contractual rights to secure the financing necessary to execute our turnaround strategy and navigate the Covid-19 crisis”. Revlon who has been hit hard by the pandemic is seeking to rework its $3bn of borrowings, is controlled by Perelman’s MacAndrews & Forbes, as it has struggled to remain relevant and stem falling sales amid competition from Estee Lauder Cos and a host of other smaller companies using social media to lure customers.