The lawsuit between Citigroup and Brigade Capital Management over Citi’s “wrong” repayment of $ 900 million in Revlon loans has already heated up.
Just one day after Citi filed a lawsuit against the hedge fund company in a court in New York, the two appeared before a judge to discuss whether the court could prevent the Brigade from using its cut in Citi’s payment, worth it. roughly $ 175 million.
Citi’s complaint, filed Monday, alleges that the company incorrectly transferred $ 900 million of its own money to companies including Brigade. Citi is the administrative agent on loans to cosmetics company Revlon and is responsible for facilitating the loans.
Citi said in its initial complaint that instead of transferring interest on Revlon’s loan, it accidentally transferred the entire principal and interest back to the lenders, one of which was Brigade. Brigade then converted that money into cash.
After filing that complaint on Monday, Citi also asked the court to temporarily prevent Brigade from using the money until the court makes its final decision in the case.
“We have quickly rectified our payment error and are taking appropriate action to recover these funds,” a Citi spokesman said in a statement. II Tuesday.
After Tuesday morning’s meeting, legal teams for both Citi and Brigade sent letters to the court, officially responding to that request.
According to the letter Brigade’s lawyer sent to the court, Citi did not give the reports of the transfer error until the day after it made the transfer.
Brigade said the transfers “did not appear in error” because Citi paid the exact amounts of principal and interest. Brigade also claimed that the transfers would require many levels of authorization and that Citi transferred money to all its lenders and funds, not just one outlier.
According to Brigade, Citi has apparently not yet explained how the accidental transfers happened.
“It is unbelievable that a sophisticated institution like Citibank could have transferred nearly $ 1 billion, in the exact amount proposed under the 2016 Credit Agreement, by mistake,” Brigade said in its letter to the court. Brigade added that it did nothing to “induce or force” Citi’s payments.
Citi’s complaint, filed Monday, said its accidental payments were accompanied by calculation statements showing the correct amount of money. In addition, the loan agreement states that each prepayment requires three days ‘notice’.
The Citi lawyer filed on Tuesday said these deviations must have been a “red flag” for Brigade and they should signal to the company that the transfers were wrong.
According to Citi’s initial complaint, Brigade’s choice to convert nearly $ 175 million in cash for its own use threatens “the integrity of the administrative bureau’s function and confidence in the global banking system.”
Citi is asking the court brigade to order the $ 175 million with interest to be repaid and the company to pay damages for “abuse.” According to Citi’s complaint, the causes of action for the process are unfair enrichment, conversion, money had and received, and payment by mistake.
