There are banking mistakes, and then there is Citigroup’s $900 million Revlon loan blunder.
Citigroup filed suit in federal court late Tuesday, seeking to claw back hundreds of millions of dollars it mistakenly transferred to the accounts of the troubled cosmetic giant’s creditors.
The financial services giant is seeking the return of $127.3 million from HPS Investment Partners LLC and $109.7 million from Symphony Asset Management LLC, Reuters reported. Citigroup contends it transferred the money in error from its own accounts on behalf of Revlon, for whom it is acting as an agent for a loan involving dozens of creditors, including the big hedge funds.
On Monday (Aug. 17), Citigroup won a court order that temporarily freezes $175 million it deposited into the accounts of Brigade Capital Management LP, a third hedge fund that had also lent money to Revlon.
As an agent on a loan to Revlon from the major hedge funds and other creditors, Citigroup had been in charge of distributing payments to HPS, Symphony Asset Management and Brigade, among others.
But the bank was reportedly only supposed to make payments on the interest, with Revlon, which has more than $3 billion in debt on its balance sheet, having lost more than $63 million in the second quarter.
Instead, Citigroup transferred $900 million into the accounts of the three hedge funds and other Revlon creditors.
The money, which came from Citigroup’s own accounts, was more than 100 times the size of the interest-only payments it was supposed to be distributing, according to Bloomberg Law.
Getting the $900 million back, though, is proving problematic, with dozens of lenders, including Brigade, “flat out” refusing to return the cash, a Citigroup lawyer told a federal judge on Tuesday, according to Bloomberg.
Pushing back, Brigade contends it doesn’t have the $175 million Citigroup is seeking, with the money being held by 40 different funds for whom the hedge fund acts as an investment manager.
Meanwhile, the error has generated unwanted regulatory scrutiny for Citigroup, with the Office of the Comptroller of the Currency and the Federal Reserve now in contact with the bank, Bloomberg reports.