Citi's $900 million 'clerical error' raises stakes in Revlon

On last Wednesday, loan operations staff at the New York bank wired $900 million, seemingly on behalf of Revlon Inc., to lenders of the troubled cosmetics giant controlled by billionaire Ron Perelman.

As Citigroup told, it was a mistake for the ages, a “clerical error,” that’s now plunged the bank into a battle between the Perelman empire and a corps of investment funds that have become its impatient creditors.

The wayward transfer of nearly a billion dollars appears to be one of the biggest screw-ups on Wall Street in ages, and it is set tongues wagging in financial markets. A spokeswoman for Citi declined to comment. A representative for Revlon said in an emailed statement that Revlon itself did not pay down the loan, or any portion of it.

Michael Stanton, a former restructuring and bankruptcy adviser, says, “It is a billion-dollar clerical error. This is probably knocking around some very big rooms at Citibank.”

At the center of the story is an increasingly ugly battle between Revlon and a group of lenders who sued the cosmetics company and demanded immediate repayment of a term loan that Revlon has coming due in 2023. Working with UMB Bank, the lenders are claiming that Revlon shifted some intellectual property rights that had been backing their loan into collateral for new debt.

The lenders, including Brigade Capital Management, Symphony Asset Management and HPS Investment Partners, are seeking a court order forcing the return of the collateral, which includes brand trademarks. Citi, the administrative agent on the loan, was also named as a defendant in the lawsuit, although it was in the process of resigning from the agent role.

Around the same time the lawsuit was filed, the nearly $900 million -- an amount equal to the full principal value of the loan, plus accrued interest -- landed in the lenders’ bank accounts, according to people familiar with the matter. Now, Brigade, Symphony and HPS are among that are refusing to hand the cash back, said the people, who asked not to be named discussing a private matter.

The lenders, including Brigade Capital Management, Symphony Asset Management and HPS Investment Partners, are seeking a court order forcing the return of the collateral, which includes brand trademarks. Citi, the administrative agent on the loan, was also named as a defendant in the lawsuit, although it was in the process of resigning from the agent role.

Around the same time the lawsuit was filed, the nearly $900 million -- an amount equal to the full principal value of the loan, plus accrued interest -- landed in the lenders’ bank accounts, according to people familiar with the matter. Now, Brigade, Symphony and HPS are among that are refusing to hand the cash back, said the people, who asked not to be named discussing a private matter.

Revlon said it would fight UMB’s “meritless” lawsuit and that the bank doesn’t have standing to sue because it’s not the agent on the loan. Revlon, controlled by Perelman’s MacAndrews & Forbes, has struggled to remain relevant and stem falling sales amid competition from Estee Lauder Cos. and a host of smaller companies using social media to lure customers. The cosmetics company has been hit hard by the pandemic and is seeking to rework its $3 billion of borrowings.