When Citi accidentally sent $900 million to Revlon’s creditors in August 2020 and later failed to recoup most of it, the bank said it became Revlon’s creditor, effectively stepping into the shoes of the funds that refused to return about $500 million of the mistaken payment. But Revlon has since hinted it may challenge Citi’s status as a lender, prompting Citi to file in bankruptcy court on Friday.
Citi is asking the Revlon bankruptcy judge to clear any doubts about its right to repay Revlon’s term loan. Because it had no obligation to pay Revlon’s debt, the bank’s denial of its rights as a creditor would allow Revlon to “avoid liability for its own debt obligations,” Citi lawyers wrote in the complaint.
According to court documents, the bank didn’t know anyone would challenge its creditor status until days before the cosmetics company filed for Chapter 11 protection in June. That’s when Revlon and some of its creditors refused to recognize the bank’s rights as a secured creditor in the company’s bankruptcy financing package.
“Unsurprisingly, neither Revlon Group nor any other interested party has ever articulated any legitimate legal or factual basis to challenge Citibank’s subrogation rights to be included in the DIP orders,” Citi lawyers wrote. “There is none.”
Revlon officials did not immediately respond to a request for comment Monday. BM
