Judge Says Revlon Lenders Can Access Citi's Mistaken Loan Payment
By Becky Yerak
Lenders that received roughly $500 million from Citigroup Inc.
last year due to a back-office blunder are allowed to use the money
as they see fit, a federal judge ruled Wednesday, unfreezing the
Judge Jesse Furman of the U.S. District Court in Manhattan on
Wednesday denied Citi's request to continue to freeze the funds
while the bank tries to persuade an appellate court it deserves the
money back. The judge had frozen the funds in August while he
considered the case.
Citi wanted the freeze to be maintained, saying it feared that
even if it won on appeal, it might have difficulty recovering the
money once the asset managers distributed it to their clients.
The dispute stems from a mistake in August in which Citi paid
off -- with its own money -- a nearly $900 million loan balance
owed by Revlon, when only an interest payment was due. When Citi
asked for the money back, some of the recipients obliged, returning
roughly $385 million.
Others -- including Brigade Capital Management LLC, Symphony
Asset Management LLC and HPS Investment Partners LLC -- declined to
return more than $500 million, touching off a legal dispute with
Citi is appealing the judge's February ruling that the lenders
could keep the funds they were wired by the bank, the loan agent in
charge of collecting and distributing interest payments from
Revlon. As the appeal continues, the bank had sought to prohibit
the lenders from using the money as they wished.
The lenders "are entitled to use the money without interference"
from Citi, the judge said Wednesday.
A Citi spokesman said the bank disagrees with the decision and
plans to file a motion with the Second Circuit Court of Appeals to
try to ensure that the funds are preserved.
At an April court hearing, Citi lawyer Neal Katyal argued that a
continued pause would cause minimal harm to the lenders. He said
the early loan repayment was tantamount to a "windfall," partly
because the debt didn't come due until 2023 but also because it had
been trading at less than 30 cents on the dollar when Citi
erroneously repaid it in full.
Judge Furman said Wednesday that Citi "faces an uphill battle on
Robert Loigman, a lawyer for the lenders, said he was pleased
with the decision and that he agrees Citi is unlikely to win its
Write to Becky Yerak at firstname.lastname@example.org
(END) Dow Jones Newswires
May 12, 2021 17:17 ET (21:17 GMT)
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