Citibank’s latest battle over accidental Revlon loan repayment

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Citibank claims Revlon owes it $500 million. Revlon – currently operating under bankruptcy protection – would like to owe Citi nothing. Citi therefore has Revlon suedin order to get a judge to say that the debt is real.

Why is this important: Citi lost $500 million thanks to its own outdated technology and a key legal precedent involving a French institution with the glorious name of To Bank. Now he wants to use another legal concept – subrogation – to make sure he can get at least some of that money back from Revlon.

State of play: Citi did not loan the money to Revlon. Instead, he accidentally and unilaterally paid off a group of Revlon lenders. Citi is still trying to get its money back from these lenders, but it didn’t have much luck so far, and if he fails on that front, he wants to be able to hunt Revlon for the money instead.

What they say : “It has become abundantly clear that the Revlon Group and other constituencies have refused to recognize Citibank’s subrogation rights,” Citi states in its lawsuit, adding, “From the date of this filing, Citibank is subrogated in the Rights of Non-Returning Lenders. Period.”

Translated into English : Revlon owed money to lenders; the lenders have been paid in full; Revlon didn’t pay anyone; Citibank should therefore be able to “subrogate” the lenders – that is, it can take over their status as Revlon’s creditors.

  • Citi’s claim is that Revlon’s debt, like Revlon’s perfume, is sustainable. (Revlon had paid interest to Citi, until it filed for bankruptcy.)

The other side: “There’s not a lot of laws about it,” said Eric Talley, a law professor at Columbia University. told Bloomberg last month, saying subrogation rights are much more common in insurance than in finance. Once the debt is paid off, maybe it has just been paid off.

  • If Citibank loses the lawsuit, then Revlon would be relieved of $500 million in debt.

The bottom line: If your business involves moving trillions of dollars around the world, it’s probably a good idea to make sure your software is well-designed. Otherwise, you’ll have to rely on the judges, and they’re not always predictable.

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