Published 12:48 IST, August 17th 2020
Citibank accidentally wires $900 million to Revlon lenders in 'clerical error'
Citibank has now appealed Revlon for reimbursement from Revlon, who had largely been in default on its mortgages but hasn't received any portion of funds back.
On August 16, the mortgage operations employees at Citigroup Inc., via Bank of New York’s lending operations staff wired $900 million to lenders mistakenly for Revlon Inc. Citigroup advised lenders that it was a “clerical error” on behalf of cosmetics firm run by Ron Perelman. Citigroup has now appealed for reimbursement from Revlon, who had largely been in default on its mortgages, according to reports. In one of the greatest errors of all times, the financial institution has plunged into a battle with Revlon as it was unable to recoup any small portion of funds back.
According to reports, three lenders that the Citi group accidentally provided the loans on behalf of Revlon namely Brigade Capital Management, HPS Investment Partners, and Symphony Asset Management have refused to pay back. Some of the entities are the creditors of Revlon. Citigroup’s funds included principal plus accrued interest for the amounts the lenders had loaned to financially struggling Revlon. As per a separate report, entities named Brigade, HPS, and Symphony have also filed a lawsuit against the cosmetic firm. In 2016, these creditors had loaned out over $1.8 billion to finance the acquisition of Elizabeth Arden.
[The United States Securities and Exchange Commission Report. Screenshot Credit: https://sec.report/Document/0001157523-20-001187/a52267012.htm]
Lawsuit “meritless"
A US broadcaster quoted a Revlon spokesman as saying that the lawsuit filed by the creditors was “meritless" and contained “baseless accusations”. Further, he alleged that Revlon would challenge the legal action in the court. A former restructuring and bankruptcy adviser, Michael Stanton, was reported saying that one of the biggest errors on Wall Street was worth some billion-dollar. He added, that the clerical error might have an impact on some big rooms in Citi. While the bank has yet to comment on the matter, it has launched an internal investigation into the incident, as per the reports.
Revlon said in a statement that a group of lenders has repeatedly used baseless accusations in an attempt to enrich themselves and harm the business. It added that they achieved this by preventing Revlon from exercising its contractual rights to obtain the financing necessary to execute our turnaround strategy and navigate the Covid-19 crisis.
Updated 12:47 IST, August 17th 2020