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Someone's Losing Their Job': Revlon Lenders Expressed Surprise at Mistaken $900 Million Payment

By Becky Yerak and Alexander Gladstone 

When Citigroup Inc. accidentally used its own funds to repay nearly $900 million owed by Revlon Inc., lenders were surprised at their unexpected payoff, according to internal chat and email messages unearthed in litigation and made public by the bank. One lender couldn't resist a joke at Citi's expense.

The mistaken payment has put the bank at loggerheads with Revlon lenders including HPS Investment Partners LLC, Brigade Capital Management LP and other hedge-fund managers, straining longstanding business relationships and touching off a high-stakes dispute in New York federal court.

In an internal chat after the payments were made, one HPS employee mimicked a conversation involving the Citi banker who was responsible, according to court papers filed by the bank Saturday.

"How was work today honey?" the unnamed employee wrote. "It was ok, except I accidentally sent [$900 million] out to people who weren't supposed to have it."

The employee also wrote that he felt bad for whoever at the bank had "fat fingered" the payment.

Citi, the loan agent hired by Revlon to distribute interest and principal payments on its debt, is pointing to these messages and other communications written in the hours and days following the payment as evidence the investors were aware they had been paid in error. Lenders have argued they had no reason to think the transactions were erroneous until Citi claimed as much and demanded repayment.

In court papers filed Friday, the lenders said they were justified in keeping what they received because no reasonable lender would believe that one of the world's biggest financial institutions would transfer by accident the full amount they were owed by Revlon, down to the penny.

A person familiar with the matter said the messages from HPS and cited by Citi were written only after the bank requested the payment be returned.

Lenders also said billionaire and controlling Revlon shareholder Ron Perelman has bailed out the beauty products company before, giving them reason to believe the company had come up with the funds to clear its loan debt.

Mr. Perelman has bailed out Revlon numerous times, the investors said, pointing to his perceived acumen for finding pockets of liquidity within his portfolio companies to refinance and pay down maturing debt to avoid a bankruptcy.

"Every time Revlon's future looks imperiled, Mr. Perelman pumps more money into the company," the lenders said in a court filing. Mr. Perelman, they said, has had a longtime "love affair" with the cosmetics company, which he acquired in 1985.

And indeed, Mr. Perelman did come to Revlon's rescue last week when his private-equity firm MacAndrews & Forbes put up some of its own capital to get a bond restructuring across the finish line and save the cosmetics company from bankruptcy. At least twice before in the past two years, he has made loans to Revlon, most recently lending it $30 million last year.

Citi has blamed its payment in August on a human processing error that turned what was supposed to be a small interest payment into a disbursement more than 100 times as big, made with the bank's own funds instead of Revlon's.

Mistrust between Citi and the lenders was building even before then. They believed that Citi was helping Revlon to restructure its debt and weather the Covid-19 pandemic in ways that would depress the value of their investments and lower their chances of being fully repaid.

They began preparing a lawsuit through UMB Bank NA, a loan agent they chose to replace Citi. Shortly before the lawsuit was filed, Citi made the $900 million payment.

As soon as Citi realized its mistake, executives began trying to claw the money back. Some firms, such as Carlyle Group Inc., KKR & Co. Inc. and Octagon Credit Investors LLC, granted the bank's request, people familiar with the matter have said.

Others refused, touching off a legal dispute that is scheduled for trial in December.

Lenders said that even Revlon's corporate treasurer has testified that nothing in the payment notification indicated it was a mistake.

"Witnesses have testified that, in their decades of experience on Wall Street, they had not seen a similar error where a bank had paid lenders the exact amount of principal and accrued interest under a loan in error, " the lenders said in a court filing.

Citi responded by citing communications in which lenders used words like "unbelievable," "erroneous," "accidental" and "overpayment" when discussing the matter. An employee at lender Medalist Partners Corporate Finance LLC said Citi was getting "a taste of their own medicine," court papers said.

At New Generation Advisors LLC, an employee involved in the matter wrote in an internal message that "mistakes like this can be hard to undo" and that he "thankfully" had prevented the investor's share of the money from being returned to Citi, according to court papers.

"Someone's losing their job over this," another employee wrote back.

Write to Becky Yerak at and Alexander Gladstone at

(END) Dow Jones Newswires

November 16, 2020 16:42 ET (21:42 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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