Citigroup heads to trial seeking to undo nearly $900 million Revlon blunder
Citigroup Inc is heading to trial on Wednesday, hoping to convince a Manhattan federal judge to undo a nearly $900 million blunder where it used its own money to repay lenders of Revlon Inc, the struggling cosmetics company.
NEW YORK (Reuters) - Citigroup Inc is heading to trial on Wednesday, hoping to convince a Manhattan federal judge to undo a nearly $900 million blunder where it used its own money to repay lenders of Revlon Inc, the struggling cosmetics company.
The unusual case could provide insight into Wall Street banks’ relationships with clients, and guidance on steps that banks must take to safeguard how money is moved.
It stemmed from an Aug. 11 incident where Citigroup mistakenly wired $893 million to Revlon’s lenders, appearing to pay off a loan that was not due until 2023, rather than a planned $7.8 million interest payment.
The bank had been acting as the loan agent for Revlon, which did not have enough cash to prepay the loan.
While some 200 Revlon lenders have repaid Citigroup, the bank is suing hedge fund and asset managers such as Brigade Capital Management, HPS Investment Partners and Symphony Asset Management to recover $501 million that it said remains due.
U.S. District Judge Jesse Furman will preside over the nonjury trial, which will be conducted by videoconference and may last four days.
Citigroup has said the defendants did not act in good faith in keeping an overpayment they knew Revlon could not afford and which they did not even tell clients about, and which an HPS staffer called the product of a “fat fingered” bank employee.
The bank’s North American loan chief and global head of loan and risk management services are expected to testify.
Revlon’s lenders have countered that they had no reason to think a sophisticated international bank would pay them by mistake, and that they were simply paid a debt Revlon owed.