Citigroup Still At Odds With Hedge Fund Over Bank Payment Mistake

In an unusually public feud, Citigroup is engaged in a squabble with a creditor over the mistaken $900 million Revlon payments from earlier this year and the possible motivations for what happened, The Wall Street Journal (WSJ) reports.

The disagreement began when Brigade Capital Management, which is a $28 billion money manager for Citigroup, disagreed with the bank over Citigroup’s aid to billionaire investor Ron Perelman in his restructuring of corporate loans for his company Revlon.

The payments in question were the subject of a Citi lawsuit from August in which the bank tried to recollect $900 million in loans it had mistakenly distributed to creditors of Revlon. On Aug. 17, the bank temporarily froze $175 million it claimed to have mistakenly sent to Brigade. But the investor still refuses to return the funds.

Brigade Capital Management was chief among those raising problems with the incident, which it said would ultimately damage their investments, WSJ writes, citing court documents and unnamed sources. Brigade believes Citi was aiding Perelman in trying to restructure Revlon’s debt so that investments would be worth less overall and they’d have less chances of being repaid.

The break is unusual for the two companies. Brigade and its founder, Donald Morgan, have both long since worked with Citigroup on fundraising, including hiring the bank to help it raise $1.5 billion of new loans over the past few years, according to stats from S&P Global Market Intelligence quoted by WSJ.

But now the two former friends are taking the case to court, with Brigade seeking to keep the $175 million the fund received when Citigroup accidentally paid out several Revlon lenders around $900 million total. The fallout of the two entities also included Citi backing out of a deal to help Brigade arrange a $400 million collaterized loan obligation, along with a second deal also in the works, sources told WSJ.

A spokeswoman for Brigade denied that it was on the outs with Citigroup.

“Though our fiduciary duty to our clients has put us into conflict with Citibank relating to their role as agent on the Revlon Term Loan, Brigade has not sought to limit any other business or trading activity with Citibank as a consequence of this specific disagreement,” the spokeswoman said, according to WSJ.

Citi has sued Brigade and other lenders that did not return the money, with a trial set for November, WSJ writes.