Citigroup urges appeals court to hit ‘rewind’ after Revlon blunder By Reuters
By Jonathan Stempel
NEW YORK (Reuters) – Citigroup Inc (NYSE:) on Wednesday pressed a federal appeals court to let it recoup about $504 million of its own money that it accidentally wired Revlon Inc lenders, saying its mistake did not entitle them to a huge windfall.
Neal Katyal, the bank’s attorney said that six red flags were raised by the lenders about the mistake and they had expected Ronald Perelman, a billionaire cosmetics business owner to pay them back for three more years.
Katyal stated to the U.S. 2nd Circuit Court of Appeals, “If you hit Rewind here it’s not unfair.” Circuit Court of Appeals Manhattan. “The parties return to the positions they bargained.”
However, one of three judges said that the New York state’s top court precedent seemed to have left legal questions unanswered about Citigroup and the response from the lenders. This court might be the first to address them.
Circuit Judge Pierre Leval explained that “each one of those questions is actually a question about policy.” We’d largely guess.”
This case was triggered by Citigroup, a New York-based bank, prepaying Revlon’s $894 million loan in August 2020. The lender lacked sufficient cash to repay the loan, due 2023.
10 Revlon loan lenders were among the clients of these asset managers. They kept the money and refused to return it.
According to them, Revlon’s loan agents, Citigroup paid what they owed. There was no reason to suspect a more sophisticated bank could make such an error.
Brigade Capital Management (HPS Investment Partners), Symphony Asset Management, and others were among the asset managers.
Citigroup lost its prepayment case to U.S. District judge Jesse Furman, who ruled that it was a “discharge at value.” The asset managers did not know of Citigroup’s mistake.
Kathleen Sullivan, Kathleen Sullivan’s lawyer stated that these managers are entitled to “finality”.
Perelman, who had previously saved Revlon from bankruptcy, made the prepayment plausible.
She stated, “They’d seen this before.”
Katyal stated that the $5.4 trillion in banking transactions are daily and there will be mistakes.
A ruling against Citigroup would expose banks to excess liability risks and could destabilize the nearly $1.2 trillion U.S. syndicated lending market. Industry groups claim that a decision against Citigroup will result in excessive risk for banks.
This case is called In re Citibank August 11th 2020 Wire Transfers 2nd U.S. Circuit Court of Appeals. No. 21-487.
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