By Jonathan Stempel
NEW YORK (Reuters) – Citigroup Inc is close to getting back about $500 million it accidentally paid to 10 Revlon Inc lenders, with three on the verge of returning their payouts and others making “substantial progress” toward a resolution, a court filing shows.
Citigroup, as Revlon’s loan agent, had accidentally used its own money in August 2020 to prematurely pay off a $894 million loan owed by billionaire Ronald Perelman’s now-bankrupt cosmetics company.
Some recipients returned their payouts after realizing the mistake, which Citigroup blamed on human error, but the 10 lenders had refused, saying the bank paid what they were owed.
The potential settlement was discussed in a joint letter by lawyers for Citigroup and the lenders, which include hedge funds and investment funds, filed late Monday night in Manhattan federal court.
A resolution would end more than two years of litigation by Citigroup against Brigade Capital Management, HPS Investment Partners, Symphony Asset Management and the other lenders, over a blunder that the bank’s Chief Executive Jane Fraser called a “massive unforced error.”
According to the letter, three lenders have “indicated they are ready to sign an agreement” to end the litigation, while the others are still working with other parties before committing to a date for returning their payments.
“The parties have a mutual interest in resolving the time frames to enable resolution,” the letter said. Both sides proposed to update the status of talks soon.
In September, a U.S. appeals court in Manhattan said the lenders did not deserve a “huge windfall,” and overturned a February 2021 ruling by a federal district judge who said the lenders could keep their payouts.
Following the earlier ruling, Citigroup had lowered previously reported profit to reflect $390 million of additional legal expenses.
Last week, the lawyers said “material terms” of a potential settlement called for Citigroup to recoup its money and transfer some interest and amortization payments.
Revlon filed for Chapter 11 bankruptcy protection on June 15.
The case is In re Citibank August 11, 2020 Wire Transfers, U.S. District Court, Southern District of New York, No. 20-06539.
(Reporting by Jonathan Stempel in New York; Editing by Simon Cameron-Moore)
