Citi Got Its $500 Million Back

In 2016, Revlon Inc. borrowed money from some banks and hedge funds. Citigroup Inc. was the administrative agent on the loan, in charge of doing stuff like forwarding payments from Revlon to the lenders. Revlon ran into some financial trouble and set out to modify its debt in an aggressive way that disadvantaged some of the lenders on that term loan. This made those lenders mad, and they geared up to sue Revlon. Just as they were about to sue, in August 2020, Citi accidentally paid off the whole loan — $900 million — with its own money. We talked about this in detail last year, and it still makes me laugh and cringe. Citi was helping Revlon with the loan modification, and its loan-modification software had an unbelievably janky user interface, and a Citi back-office person pressed the wrong button and paid off the whole loan. Oops.

The next day Citi realized what it had done and emailed the lenders to be like “sorry that money wasn’t meant for you, please send it back.” This is a thing that happens! In high finance, sometimes sophisticated counterparties send each other mistaken transfers, and then they email and say “sorry about that, wrong number,” and then the counterparties send it back. These people deal with each other repeatedly, and you can’t just keep money that a bank sends you by accident, both as a legal matter and as a norm of politeness. But in this particular case the lenders really wanted the money (because Revlon was in distress, the loan was worth a fraction of its face value, and getting paid off early at par was good) and were already pretty mad at Citi (because it was helping Revlon do the aggressive modification that disadvantaged them), so lenders who held about $500 million of the loan didn’t send the money back to Citi and said “see you in court.”