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Hard to know what's more bonkers about this story: that Citibank "accidentally" sent $175m to a hedge fund called Brigade Capital, or that Brigade is refusing to return it.
https://edition.cnn.com/2020/08/18/investing/citibank-sues-brigade-capital/index.html
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https://edition.cnn.com/2020/08/18/investing/citibank-sues-brigade-capital/index.html
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Brigade was part of a syndicate that financed Revlon's buyout of Elizabeth Arden (an anticompetitive merger that never should have been approved, but whatever). Citibank administers Revlon's loan payments to its creditors.
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Last week, Citibank wired $900m extra to Revlon's various creditors, then immediately informed them that it had made a mistake and asked them to send it back. Brigade said no, arguing that this was just Citi paying back the whole loan at once.
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Complicating matters is a claim by Revlon's creditors that it engaged in "collateral stripping," in which it promised the trademarks it put up as collateral for the original loan to get new loans to see it through the economic apocalypse.
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This gambit is an emerging play in the debt-driven private equity ponzi scheme, whereby already debt-crushed companies can raise even more money by putting up the same collateral twice.
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The company most closely associated with the scheme is J Crew, a company that was plunged into debt by private equity looters who borrowed heavily, pocketed the money, and destroyed the company's reputation by reducing quality and raising prices.
https://www.npr.org/transcripts/861378110
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https://www.npr.org/transcripts/861378110
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To stave off a reckoning for this autophagia, the creditors exploited an ambiguity in its contracts with its creditors to borrow again on the same trademarks it put up as collateral on the first loan.
https://www.npr.org/transcripts/861378110
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https://www.npr.org/transcripts/861378110
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This is what Revlon is doing, as well, and creditors are scrambling, demanding repayment in full on their loans even as the collateral is being promised to new lenders.
https://www.bloomberg.com/news/articles/2020-08-15/citi-s-900-million-blunder-raises-stakes-in-revlon-showdown
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https://www.bloomberg.com/news/articles/2020-08-15/citi-s-900-million-blunder-raises-stakes-in-revlon-showdown
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Brigade and two other funds - Symphony and HPS - are among the creditors whom Citi seemingly (accidentally?) repaid in full on Revlon's behalf. Now, they're taking the position that Citi was fulfilling their prior demand for immediate redemption and will not return the funds.
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Citi's gotten a court to issue an injunction barring the creditors from withdrawing the funds while they fight it out, and Revlon insists it has no intention of paying back the loans as that would compromise its "turnaround strategy."
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Though two things remain unclear:
I. Why and how the actual fuck did Citibank "accidentally" wire $900,000,000 to these funds?
and:
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I. Why and how the actual fuck did Citibank "accidentally" wire $900,000,000 to these funds?
and:
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II. Is Revlon's "turnaround strategy" to invest in a time machine so it can go back in time and not engage in idiotic and heavily leveraged mergers to monopoly?
eof/
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