Citi Is Denied Stay of Mistaken-Payment Ruling During Appeal

Citigroup Inc. lost another round in its fight to reclaim half a billion dollars it accidentally sent to a group of Revlon Inc. lenders last summer, as a judge declined to put a freeze on the money while the bank pursues an appeal.

The funds will remain on hold, however, pending a request from Citigroup for an injunction from the appeals court freezing the money while it challenges the decision. It has seven days to make that request

The conflict started after Citigroup inadvertently wired more than $900 million to asset managers for the Revlon lenders and then asked for it back. The bank sued firms -- including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management -- that wouldn’t return the funds. It unexpectedly lost that battle in February when U.S. District Judge Jesse Furman said the creditors were entitled to keep the funds.

In his ruling on Wednesday, Furman said it was tempting to grant Citigroup’s request to put his decision on hold, “given the amount of money at stake and the compelling arguments” made by the bank and industry groups on its behalf. But he denied the request, saying that his decision was based on a “detailed analysis of the facts and the law” and that the Revlon creditors “are entitled to use the money without interference from Citibank or the court.”

“We disagree with the district court’s decision and will file an expedited motion with the court of appeals to ensure the funds are preserved,” Danielle Romero-Apsilos, a spokeswoman for Citigroup, said in a statement.

Robert Loigman, a lawyer for the investment funds, said they are “pleased with the court’s thorough and thoughtful” decision.

“We agree that Citi is not likely to prevail on its appeal, including because its arguments are contrary to binding New York law,” Loigman said in a statement. “As the court noted, Citibank has not raised ‘serious questions’ going to the merits of the dispute.”

The appeal is Citibank NA v. Brigade Capital Management LP, 21-487, U.S. Court of Appeals, Second Circuit (Manhattan). The lower-court case is Citibank NA v. Brigade Capital Management, 20-cv-6539, U.S. District Court, Southern District of New York (Manhattan).

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