The Washington Post

Citigroup wins case of ‘unforced error’


Citigroup persuaded a federal appeals court to force a group of Revlon creditors to return more than a half-billion dollars it accidental­ly sent them.

A trio of judges in Manhattan overturned U.S. District Judge Jesse Furman’s surprise decision allowing the lenders — which include Brigade Capital Management, HPS Investment Partners and Symphony Asset Management — to keep $504 million they were mistakenly sent in August of 2020.

The appellate decision is a major victory for Citigroup’s main banking unit in its efforts to redeem the embarrassi­ng blunder, which captivated Wall Street and forced Citibank to explain to regulators how it made the jumbo mistake. Chief executive Jane Fraser called it a “massive unforced error” and showed examples of manual processes that need to be automated.

The dispute turns on the “discharge for value” defense, establishe­d by a 1991 New York court ruling that creditors can keep money sent to them in error if they didn’t realize the payment was a mistake.

Citibank was trying to send an interest payment to Revlon lenders managed by Angelo Gordon and Co., who were swapping their positions in a 2016 term loan for positions in a different credit facility. Instead, the bank accidental­ly paid all the creditors on the loan — more than $900 million. It managed to recover almost half the funds, but other lenders refused to give their sums back, saying Revlon had already defaulted and should have repaid them.

In a painful piece of bad timing, Citibank was preparing to resign its role as administra­tive agent on the loan when it wired the huge sum to the lenders.

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