The bank administered a loan of some $1 billion, sending payments from Revlon to the lenders. Citibank mistakenly sent a wire transfer of the entire principal amount due when it only intended a single installment.
Under established law, the money that Citibank wired should be repaid because it was sent by mistake. But U.S. District Judge Jesse Furman upset settled law and allowed lenders to keep the money on the ground that the recipients did not have notice that the funds had been sent erroneously. If that became the rule, it would upset the important relationships among lenders, borrowers and trusted intermediaries.
Mistakes like this occur with surprising frequency. In 2017, the German bank KfW mistakenly transferred $5.4 billion to lenders. In China, the bank Rural Commercial Bank in Changsha thought that a customer’s 10-digit account number was actually the amount of money to be transferred, and mistakenly sent 1.2 billion yuan (around $190 million) to the customer. Deutsche Bank recently sent $6 billion to a U.S.-based hedge fund in error. In all these cases, the banks recovered the errant funds transfers almost immediately.
Author(s): Jonathan Macey
Publication Date: 8 June 2021
Publication Site: Wall Street Journal
Citigroup Inc. is punishing investment firms that kept payments the bank accidentally sent to Revlon Inc. lenders by blocking them from certain new debt offerings led by the bank, according to people with knowledge of the matter.
The bank is choosing to not invite these money managers, who hung on to over $500 million, to its new-issue debt deals, the people said, asking not to be identified discussing a private matter. Firms targeted include Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, the people said.
These firms and others tangled in a lawsuit with Citigroup can still participate if an issuer specifically requests for them to be able to join their offering, one of the people added.
Author(s): Katherine Doherty, Paula Seligson, Jennifer Surane
Publication Date: 10 March 2021
Publication Site: Bloomberg
It was hardly the role Citigroup Inc.’s bankers signed up for when they helped Ron Perelman’s Revlon Inc. borrow US$1.8 billion in 2016. But, now a back-office blunder is leaving the financial behemoth faced with the prospect of becoming one of the biggest creditors to the troubled cosmetics empire.
A surprise ruling by a New York judge on Tuesday blocked Citigroup’s efforts to recover US$500 million it had mistakenly sent Revlon’s lenders last year as the so-called administrative agent on the company’s loan. While the bank says it will appeal the decision, a failure to overturn it will leave Citigroup holding the bag on the bulk of the US$900 million remaining on the loan that Revlon hasn’t itself paid.
“Revlon’s loan was never paid off. So if appeals fail, Citi will ultimately step into the shoes of the lenders and own US$500 million of that nearly US$900 million term loan.” said Philip Brendel, a senior distressed debt analyst at Bloomberg Intelligence.
Author(s): Katherine Doherty, Bloomberg News
Publication Date: 17 February 2021
Publication Site: Bloomberg