Citi Blasts Revlon Lenders, Saying All They Had to Do Was Call
(Bloomberg) -- To Citigroup Inc., the legal brawl over a half-billion-dollar mistake that stirred wonder -- and fear -- on Wall Street could have been avoided with a simple phone call.
That’s what Neal Katyal, arguing for the company’s main banking unit, kept coming back to as he tried to persuade a trio of judges that the Revlon Inc. lenders Citibank accidentally sent $504 million to last year should give it back. The bank, as administrative agent on the loan, got back about half of its total $900 million blunder from other creditors and sued the rest. It lost and argued its appeal before the judges on Wednesday.
“The defendants themselves thought Revlon was insolvent at the time, then miraculously get a billion dollars,” Katyal told the panel of the federal appeals court in Manhattan. With a note of incredulity, he suggested the solution: “Pick up the phone, call Citi and ask.”
Six of the 10 lenders in the case didn’t even know they’d received the mistaken payments until Citibank called to tell them, Katyal told the court, arguing they were hardly expecting the money. In addition, he said, they should have known the transfer was in error because they never received a notice that Revlon had paid off the loan.
Katyal urged the panel to keep the funds from being distributed until the case is resolved. The lenders “want the money now, years ahead of time, when that wasn’t the bargain they agreed to in the contract they signed,” he said.
Kathleen Sullivan, a lawyer for the creditors, told the judges it’s common in the syndicated loan industry for borrowers to pay off a loan without warning. “Notices come in haphazardly, late, sometimes not at all, sometimes after the fact,” sometimes split between interest and principal, she argued. Ronald Perelman, the billionaire owner of Revlon, has been known to prepay loans in cash and at full value, making it even more reasonable that the lenders assumed the jumbo payment was intentional, Sullivan said.
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