Citigroup urges appeals court to hit ‘rewind’ after Revlon blunder

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Citigroup on Wednesday pressed a federal appeals court to let it recoup about $504 million of its personal money that it by chance wired Revlon lenders, saying its mistake didn’t entitle them to an enormous windfall.

The financial institution’s lawyer Neal Katyal mentioned the lenders had six “red flags” of the error, and had not anticipated the cosmetics company managed by billionaire Ronald Perelman to repay them for an additional three years.

“If you hit rewind here, it’s not unfair,” Katyal advised the 2nd U.S. Circuit Court of Appeals in Manhattan. “The parties get returned to the position that they bargained for.”

But one member of the three-judge panel mentioned a key precedent from New York state’s highest court appeared to depart authorized questions on Citigroup’s cost and the lenders’ response unanswered, and which maybe that court ought to answer first.

“Each of those issues is really a question of policy,” Circuit Judge Pierre Leval mentioned. “We would largely be guessing.”

The case stemmed from New York-based Citigroup’s August 2020 prepayment of an $894-million mortgage for Revlon, which lacked sufficient money to repay it, that was not due till 2023.

Lawyer Neal Katyal, representing Citigroup, argued that hitting “rewind” on Citi’s early reimbursement of Revlon’s mortgage can be probably the most honest consequence.
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Rather than return their share of the money, 10 asset managers whose shoppers included the Revlon lenders saved it.

They mentioned Citigroup, performing as Revlon’s mortgage agent, paid precisely what was owed, they usually had no motive to consider a classy financial institution would err so badly.

The asset managers included Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, amongst others.

Citigroup mentioned it inadvertently pay as you go an $894-million mortgage for Revlon that was not due till 2023, and Citigroup needs to get a few of that money again.
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On Feb. 16, U.S. District Judge Jesse Furman dominated in opposition to Citigroup, saying the prepayment was a “discharge for value,” and the asset managers weren’t on discover of Citigroup’s blunder.

Those managers deserve “finality,” their lawyer Kathleen Sullivan advised the appeals court.

She additionally mentioned the prepayment appeared believable as a result of Perelman had beforehand bailed out Revlon.

Billionaire Ronald Perelman controls the Revlon cosmetics company, whose repaid mortgage is on the coronary heart of a authorized battle Citigroup is waging.
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“They’d seen it before,” she mentioned.

But Katyal mentioned the banking trade wires $5.4 trillion every day, and errors will occur.

Industry teams have mentioned a ruling in opposition to Citigroup might expose banks to extreme legal responsibility dangers, and destabilize the roughly $1.2 trillion U.S. syndicated mortgage market.