Now, thanks to the creative eye of Paul Singer, (almost) all sovereign debt deals include some pretty stringent collective action clauses, even without the assistance of the New York State Legislature. And, thanks to the incomprehensible idiocy of one of the world’s biggest and allegedly most sophisticated banks, the boilerplate has been amended once more to make it literally idiot-proof.

Wall Street banks including Citi are protecting themselves from similar situations by inserting legally binding clauses in the form of accidental payment covenants in debt documents, which allow banks to demand the repayment of any money sent to lenders by mistake…. The covenant typically gives banks the discretion to judge whether a payment was mistakenly made and to demand its repayment as well as any interest from the date that the funds were received….

The accidental payment protection has so far been spotted only in US documents, according to Steven Hunter, chief executive of 9fin, who said it may be because of a quirk of New York’s law which allowed Revlon’s hedge fund investors to keep the accidental transfer…. “This is probably going to become pretty standard . . . There’s no harm in putting it in,” he said.

It also can’t hurt to not do business with the hedge funds that necessitated the change in the first place.

The bank is choosing to not invite these money managers, who hung on to over $500 million, to its new-issue debt deals, the people said, asking not to be identified discussing a private matter. Firms targeted include Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, the people said.

These firms and others tangled in a lawsuit with Citigroup can still participate if an issuer specifically requests for them to be able to join their offering, one of the people added…. At least two firms that received the errant payments opted to return it last year after the bank threatened to retaliate, according to people familiar with the matter.

Banks adopt new debt terms to avoid repeat of Citi’s $900m payment mishap [FT]
Citi Blocks Firms With Errant Revlon Payout From Debt Deals [Bloomberg]

Revlon, of course, called the allegations “baseless” and nothing more than an attempt by the people who saved the company back in 2016 to now destroy it to their own nefarious ends. And yet, on Thursday morning, those hedge funds woke to find that they had been fully repaid—principal and accrued interest—to the tune of almost $900 million.

Was this theirs most successful lawsuit in the history of litigation, so hard-hitting that Revlon decided to pay them back without negotiating or even telling them it would do so? Did Ron Perelman have an uncharacteristic change of heart?

Nope. Turns out Citigroup just screwed up spectacularly.

The money didn’t come from Revlon, another person familiar said…. Citi, the agent for the 2016 lending agreement, also was named in the lawsuit as a defendant. The bank caught Thursday’s error quickly and initiated a process to recall the money, a person familiar with the matter said. Some lenders have begun returning what they received, this person said.

Citigroup Pays Revlon Lenders Nearly $900 Million by Mistake [WSJ]