Citigroup on Monday asked a federal court to order Brigade Capital to return $ 175 million that the bank mistakenly sent to the hedge fund – a portion of the $ 900 million wrongly transferred to creditors of the troubled cosmetics company Revlon.
The wrong payment, which Citigroup attributed to an ‘operational error’, happened last Tuesday. The New York-based bank moved to recover the funds within hours of the transfers, which were, on average, more than 100 times the value each creditor had to receive. But it has so far failed to get the full amount back.
Citigroup was intended to send Brigade only $ 1.5 million in accrued interest for the term loan that the hedge fund had, according to the lawsuit. Instead, the bank entrusted $ 176 million of its own funds to Brigade.
“We have caught our payment error quickly and are taking the appropriate action to recover these funds,” Citigroup said in a statement.
Revlon’s company has been hit hard by the coronavirus pandemic and Brigade is one of a group of creditors, including Symphony Asset Management and HPS Investment Partners, who have filed with the company over their debt restructuring plans. Symphony and HPS also received incorrect payments.
The term loan held by the group was sealed in 2016 to help Revlon pay for its acquisition of Elizabeth Arden. However, its value has plummeted in the past six months, trading at 26 cents on the dollar this month compared to 77 cents at the beginning of the year.
The holders accuse the company of misusing intellectual property as collateral for other debt in 2019 and 2020. In a lawsuit filed last week, they accused Revlon of “stealing the collateral of deadlines for 2016”.
Citigroup’s lawyers at the law firm Mayer Brown wrote in their complaint that “Brigade has taken the baseless position that Citibank’s overdraft – more than 100 times the amount of the intended transfer – served to pay Revlon’s full principal balance as well.” .
She added: “The actions of Brigade are not only unintentional; they threaten the integrity of the function of governing body and the confidence in the global banking system. ”
Citigroup has discussed the situation with its regulators, according to a person familiar with the matter. Brigade, Symphony and HPS declined to comment.
