The Mistake That Led To Citi's Infamous $900M "Fat Finger" Has Finally Been Exposed

Mistaken transfers like this aren't totally unprecedented: Deutsche Bank once accidentally paid out a dizzying $28 billion, more than the bank's entire market cap. But things got complicated when a group of Revlon creditors, who had been engaged in a legal game of chess with the company and Perelman, whom they'd accused of stripping assets from Revlon via additional debt deals in contravention of the loan covenants, decided they would keep some of the money - about $500MM.

Brigade, HPS, and Symphony had accused Revlon of violating the terms of its loan agreement by pledging some of its intellectual property, including trademarks, as collateral for new debt. The furious investors made little secret of their antipathy toward Revlon, Perelman and Citigroup, which helped to facilitate the move (after all, those new loan deals represented business that does bring in "meaningful revenue" for the bank. Who cares about the former creditors?). Citigroup helped Revlon secure a new loan from a lender "sympathetic to management" (ie a friend of Perelman's who would side with the company over other creditors, effectively placing some of Revlon's most valuable assets out of creditors' reach in the vent of a bankruptcy).

Brigade, HPS, and Symphony had accused Revlon of violating the terms of its loan agreement by pledging some of its intellectual property, including trademarks, as collateral for new debt. In the eyes of these funds, this put some of Revlon’s most valuable property out of their reach in the event of a bankruptcy. The investors also had made little secret of their antipathy for Citigroup, which they faulted for facilitating the move and for helping Revlon secure a new credit line from a lender sympathetic to Revlon management that would side with the company in disputes among creditors.

Court documents reveal what happened next: asset managers who received the money howled with laughter as notices from Citi demanding the money be returned started hitting their inboxes. HPS and a dozen other asset managers replied that they believed they were owed the money, and decided to keep it. "We were just paid money that we were owed by a borrower and an agent who were involved in a significant game of chess," Symphony Asset Management head Scott Caraher told the court.

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