brigade-says-it-doesn’t-have-$175-million-from-citigroup-mistake

Brigade Says It Doesn’t Have $175 Million From Citigroup Mistake

(Bloomberg) — Brigade Capital Management LP says it can’t return the $175 million that Citigroup Inc. mistakenly paid — part of a $900 million error — because the money went to other funds.

“As Citibank is well aware, Citibank wired money to approximately 40 different funds that employ Brigade as their investment/collateral manager, and thus must know that Brigade itself was not a lender and does not have the money for which Citibank is now suing,” Brigade said in a court filing Tuesday.

In a lawsuit filed on Monday in New York, Citigroup asked a federal court to order Brigade to return its share of payments that the bank mistakenly wired to Revlon Inc. lenders, some of which are locked in a bitter fight with the struggling cosmetics giant. Citigroup, the administrative agent for the loan, said it intended to make interest payments on Revlon’s behalf but accidentally transferred amounts more than 100 times greater.

The bank has recouped less than half of the money, which it blamed on a clerical error. Some of the lenders are refusing to give it back, including three firms that claimed Revlon was in default on a loan and should have repaid them anyway, according to people with knowledge of the matter. The bank has begun briefing watchdogs, including the Office of the Comptroller of the Currency and the Federal Reserve, about how it mistakenly misdirected so much money, people familiar with the matter said.

Brigade was supposed to receive $1.5 million in interest on loan principal of $174.7 million, according to the complaint. It instead got $176.2 million and has refused to repay the funds “despite crystal-clear evidence that the payments were made in error,” Citigroup said in its suit.

Brigade said Tuesday the lenders were “lawfully owed every penny that was transferred by Citibank in Revlon’s name” and that it couldn’t have known the payments were a mistake.

“It is not believable that a sophisticated institution like Citibank could have transferred nearly $1 billion, in the exact amount outstanding under the 2016 Credit Agreement, in error,” Brigade said in the filing. “How should the lenders have been on notice when Citibank itself cannot explain its story?”

A court hearing is scheduled Tuesday morning over Citigroup’s request for a temporary restraining order.

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