Citigroup v Brigade Capital Management

A judgment that will surely strike terror into earnest hearts in the global trust and agency community, the US District Court’s stonking 105-page judgment in the Citigroup v Brigade Capital Management addresses a perfect storm of unexpected factors to come to a quite terrifying conclusion. This case has everything: it is as if all the ghastly phantoms of commercial legal practice converged in some mountain eyrie for a satanic feast on the bones of a poor, harmless, well-meaning global banking conglomerate.

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The facts are straightforward enough — though behind them there are complicated cross-currents and counterwinds that led the parties to behave the way they did. In any case, Revlon — you know, that Revlon: lippy, perfume, nail polish, that sort of thing; a struggling “heritage” brand — borrowed a ton of money from a syndicate of lenders in 2016 to acquire Elizabeth Arden. The structure of the financing was complex, involving senior and junior facilities, the pledge of certain collateral, but the important thing to know about the loan was that Citigroup acted as Revlon’s loan servicing agent. A loan servicing agent is an administrative role: It keeps a register of the lenders, who is owed what, and handles interest and principal payments to the lenders on the borrower’s behalf.

The key concept here is “agent”, my little legal eaglets. Citigroup assumed no responsibility for Revlon’s obligations: it would generally require Revlon to pre-fund it with whatever is needed to make any payments to the lenders. If — as it seemed increasingly likely to as time passed — Revlon was unable to meet its obligations, Citigroup would not be in the firing line. “I ... just work here, you know.” Citi had no skin in the game.

You can imagine the indemnities, disclaimers, waivers and exclusions of liability littered through Citigroup’s legal documents. If you think they were bad before, just shudder in horror at what they will be like now.

See also

• Judgment transcript