Citigroup's request to freeze around $175 million in funds that were paid to hedge fund manager Brigade Capital Management by mistake has been granted by a judge, The Wall Street Journal (WSJ) reports.
Citi wired $900 million owed by Revlon to various lenders that have been in a tangle with Revlon over its debt restructuring strategies. Brigade has contended it doesn't have to return the $175 million, which was its share of the $900 million loan payment, WSJ reported.
But Manhattan U.S. District Judge Jesse Furman said otherwise, ruling that Brigade isn't allowed to withdraw, transfer or do anything else with the money, according to WSJ. Citi has said the payment was a mistake, made in error from the bank's own funds.
Citi asked for the money back, but it was refused by Brigade Capital, which said it was unsure if the payment was actually a mistake. Brigade's lawyer, Robert Loigman, said that the payments could be presumed to be correct, due to the fact that they were in the exact amounts owed by Revlon. He said it was "not believable that a sophisticated institution like Citibank could have transferred nearly $1 billion, in the exact amount outstanding under the 2016 credit agreement, in error," according to WSJ.
Citi countered that Brigade had to know the payment was a mistake because Revlon didn't have anywhere close to $900 million on hand. The company had $415.7 million in liquidity as of June 30, WSJ reported.
Other investors have also kept the money, using the logic that it was theirs to begin with, and they're not required to lend to Revlon again after being repaid, according to WSJ.
Citi claimed it meant to send the lenders several months' worth of interest, but actually paid on average over 100 times more than it initially intended to, due to issues with the bank's loan processing system, according to WSJ. But the payments were a boon for lenders, repaying in full loans that hadn't been due yet. The loans had been changing hands at less than 30 cents on the dollar last week.