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Citi Should Get Back Rest of $900 Million Flub, Trade Groups Say

    

Photographer: David Paul Morris/Bloomberg

Citigroup Inc. should have more than $500 million it says it mistakenly transferred to Revlon Inc. creditors returned, financial services trade groups told a federal judge ahead of a trial over the payments.

Citi says an employee’s error caused it to accidentally send more than $900 million in August to Revlon lenders who were expecting a periodic interest payment, some of whom were engaged in a dispute with the struggling cosmetics giant. While the bank has recovered about $390 million, it has sued more than a half-dozen firms that have refused to return the money. A trial is scheduled to begin next month before U.S. District Judge Jesse Furman in Manhattan.

On Wednesday, the trade groups filed briefs in the case in support of Citigroup, urging Furman to force firms that manage the loans for the creditors to return the funds. Those firms include Brigade Capital Management LP, HPS Investment Partners and Symphony Asset Management LLC.

The groups said a court ruling allowing the firms to keep the money would expose banks that facilitate wire transfers and serve as administrative agents to unnecessary risk.

‘Mistakes Do Happen’

One of the briefs was filed by the Loan Syndications and Trading Association, a not-for-profit group that represents more than 500 firms involved in the origination, syndication and trading of commercial loans whose members include both Citigroup and most of the creditors involved in the case. The group said that while the syndicated loan market is largely automated, “mistakes do happen” and participants routinely return incorrect payments, as have many of the Revlon creditors.

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