Revlon Sued by Citi Following US$900m Error
(17 August 2022 – United States) Citi has sued Revlon to resolve a complex legal definitional challenge over lender status that emerged after the Bank erroneously transferred US$900 million to the company’s lenders.
The issue has changed in complexion following Revlon filing for bankruptcy. Last year Citi lost in its attempt to retrieve US$500 million it erroneously transferred to a group of Revlon creditors in 2020 with Judge Jesse Furman of the US District Court for the Southern District of New York labelling the Bank’s mistake “one of the biggest blunders in banking history”.
Following Citi accidentally transferring US$900 million to Revlon lenders in August 2020 and failing to retrieve most of the funds, the bank said it became a lender to Revlon and effectively supplanted the funds who refused to return US$500 million of the mistaken payment. Revlon has since inferred it may challenge Citi’s status as a creditor, prompting Citi to file suit in bankruptcy court. Citi is asking Revlon’s bankruptcy judge to dispel any doubt about its right to repayment under the Revlon term loan. Because it had no obligation to pay down Revlon’s debt, denying the bank its rights as a creditor would let Revlon “escape liability for its own debt obligations”, lawyers for Citi wrote in the complaint.
The bank was not aware anyone would challenge its status as a creditor until days before the cosmetics company filed for Chapter 11 protection in June 2022. It was then that Revlon and some of its creditors refused to acknowledge Citi’s rights as a secured lender in the company’s bankruptcy financing package.
“Unsurprisingly, neither the Revlon Group nor any other party-in-interest had ever articulated any legitimate legal or factual basis for challenging Citibank’s subrogation rights for inclusion in the DIP Orders. There is none” lawyers for Citi stated.
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