Citi asks Revlon lenders to return mistaken $900 million
Citigroup is attempting to recover almost $900 million it mistakenly paid to Revlon lenders who are locked in a bitter fight with the struggling cosmetics giant over a 2016 asset transfer.
The bank had recouped some of the money, which the New York-based lender blamed on a clerical error, and more was trickling in on Friday, according to people with knowledge of the matter. But more than half of it remained uncollected because some of the lenders — who had claimed Revlon was in default and should have repaid them anyway — are refusing to return it, said the people, who asked not to be identified because the matter is private.
The sum was the equivalent to the principal amount of an outstanding Revlon loan plus accrued interest, the people said.
A representative for Citigroup declined to comment on the payment, which was earlier reported by The Wall Street Journal. Revlon said it wasn’t behind the payment.
“Revlon did not pay down the loan or any part of the loan,” a representative for the company said in an emailed statement.
The payment error comes as Revlon, controlled by Ron Perelman’s MacAndrews & Forbes, is embroiled in a legal dispute with a group of its lenders over the company’s debt-restructuring tactics. On Wednesday, UMB Financial in Kansas City, Mo., sued Revlon on behalf of certain dissenting lenders including Brigade Capital Management and HPS Investment Partners, claiming it moved valuable brand assets beyond lenders’ reach to the benefit of other creditors.
Along with the suit, the $29.8 billion-asset UMB sent Revlon a notice of acceleration on the loans, claiming the company is operating under a default, the people said. Revlon said it would fight UMB’s “meritless” lawsuit and said UMB doesn’t have standing because it’s not the agent on the loan.
“This group of lenders has repeatedly resorted to baseless accusations in an attempt to enrich themselves and hurt the company by blocking Revlon from exercising its contractual rights to secure the financing necessary to execute our turnaround strategy and navigate the COVID-19 crisis,” Revlon said in an earlier statement.
Revlon has struggled to remain relevant and stem falling sales amid competition from Estee Lauder Cos. and a host of smaller companies using social media to lure customers. Saddled with nearly $3 billion of debt, the retailer has been hit hard by the pandemic and is seeking to rework its borrowings.
Because of the legal battle, Citigroup had already been in the process of resigning from its administrative role before the payment mishap, the people said.
A full repayment is something of a coup for distressed credit specialists with positions in Revlon’s loan. The loan is trading hands for less than 30 cents on the dollar, signaling that investors have dim hopes of being paid back in full under normal circumstances. The cosmetics company has been weighing options for restructuring its $3 billion debt load, many of which would require lenders to take significantly less than par value on the debt.