The hedge funds could hardly believe their luck. On Wednesday, they had sued Revlon, accusing it of doing what private-equity owned companies do, which is to say moving valuable assets in such a way as to keep them out of the hands of creditors. The only problem, according to those hedge-fund creditors, was that those assets were collateral backing the $1.8 billion loan they made to the cosmetics giant. As collateral exists to be seized by lenders such as the hedge funds in the event that a company, say one hard hit by the coronavirus pandemic like Revlon, is unable to make its payments on those loans, this was understandably upsetting.
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.