Citigroup Inc. is moving to the court against hedge fund, Brigade Capital to get back its $176.2 million it mistakenly transferred.
The money was a part of Citi’s $900 million accidental transfer to creditors of the struggling cosmetics company Revlon. The Wall Street bank cited 'clerical error' behind this major mishap.
Citi was about to transfer $1.5 million to Brigade, which is only the interest on the loan principal of $174.7 million, instead, it transferred a total of $176.2 million to the hedge fund.
A Run for Loan Recovery
Though the bank has managed to recoup less than half of the transferred sum, some of the lenders are refusing to return the money. Three firms are claiming that the cosmetics company defaulted on the loans and they are already entitled to receive the sum.
Revlon took a major hit to its business due to the dominating small social media-focused companies and also due to the ongoing pandemic. Operated by Ron Perelman’s MacAndrews & Forbes, the company currently has a debt of nearly $3 billion and is working on reworking its borrowings.
The loans are being traded at 30 percent of their value, meaning the lenders have little chance of recovering their money.
According to Bloomberg, Citi was already in the process of resigning from the role of Revlon’s administrative agent.
“[Brigade] should have known that a surprise repayment of principal could not be made under the governing credit agreement,” Citi said. “And it was well aware that virtually no company, let alone a distressed retail and consumer company such as Revlon, would ever make such a substantial repayment while dealing with the significant financial consequences caused by the ongoing pandemic.”
The bank is saying that the transferred funds were from the bank’s own account and is not Revlon’s money.
