It was hardly the position that the bankers of Citigroup Inc. signed up to when they helped Ron Perelman’s Revlon Inc. borrow $1.8 billion in 2016. But now the back-office blunder leaves the corporate behemoth facing the risk of becoming one of the largest creditors of the struggling cosmetics empire.
The unexpected decision of a New York judge on Tuesday blocked Citigroup’s attempts to reclaim $500 million that it unfairly gave Revlon’s lenders last year as the so-called administrative agent on the company’s debt.
Although the bank argues that the ruling will be challenged, the failure to reverse the decision will leave Citigroup keeping the bag for the majority of the $900 million left in the loan that Revlon has not paid for itself.
Revlon’s debt has never been returned. So if the appeals fail, Citi will finally move into the lenders’ shoes and own $500 million of the nearly $900 million long-term loan. said Philip Brendel, Bloomberg Intelligence’s senior debt analyst.
Representatives for Citigroup and Revlon refused to speak.
In an additional twist of irony, Citigroup will also keep a debt that—only nine months ago—lenders Revlon’s accused the cosmetics firm of defaulting because it transferred its intellectual property to acquire another loan. In that case, the furious creditors gave Citigroup the default notice as an administrative director.
Job Agent
The traditional sleepy loan agent is the bank’s job in receiving and administering interest rates, handling amortization schedules and supplying other housekeeping services while upholding contractual responsibilities with both the borrower and its lenders. It’s not high-fee jobs, but it’s seen as important to obtain more lucrative underwriting and advice.
Combat begins
An fascinating issue remains as a result of this opinion, Columbia Law School professor Eric Talley said in an interview. Is Citibank now seeking to rebound from Revlon? In other terms, they might say that they bought the loan from the lenders, and now Revlon owes Citibank.
Revlon has been fighting to save dropping profits and to get rid of start-up cosmetics firms. The pandemic made its finances poorer as consumers sitting at home had little incentive to purchase new cosmetics.
The war for the wrong transfer is far from over. Citi has promised to appeal the case, and Brendel said that further cases against Citi and Revlon are still likely.
