Citigroup v Brigade Capital Management: Difference between revisions

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. The [[JC]] liked it so much he has formulated a new equitable principle: [[durum caseum per magnos canibus]]: “hard cheese for big dogs”: a sort of dark inversion of the [[JC]]’s [[anus matronae parvae malas leges faciunt]]<ref>“[[little old ladies make bad law]]”</ref> principle.

Revlon — you know, that Revlon: lippy, perfume, nail polish, that sort of thing; a struggling “heritage” brand — borrowed a ton of money in 2016 to acquire Elizabeth Arden.<ref>What made Elizabeth Arden? Max Factor.</ref> The financing was complex but the thing to know was that Citi acted as Revlon’s [[loan servicing agent]]. A loan servicing agent 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. Citi had no responsibility for Revlon’s obligations: Revlon would pre-fund all the payments it needed to make to the lenders. If — as seemed increasingly likely — Revlon could not meet its obligations, this was the Lenders’ problem, not Citi’s

It came time, in August 2020, for Revlon to pay about $8m ininterest on its loan. It put Citi in funds, as it was obliged to. Then someone at Citi made what, on hindsight, he may regard as a “bit of a ''bish''.”<ref>You could, and I just might, write a whole article about the wisdom of the inevitable claims of “[[operator error]]” here: that that “someone” worked for an [[outsourced]] operation in a low-cost jurisdiction might be an irony beyond the capacity of those Citi executives who are still there, to see the funny side of. The application he was obliged to use to make that payment, and the accompanying [[playbook]] explaining how to use it, was utterly baffling. Doubtless, Citi will put this down to “[[operator error]]”.</ref> Instead of instructing the interest payment, the [[operations]] team instructed a full repayment of ''[[principal]]''. Eight-hundred and ninety-three million dollars of the stuff. Nearly, as the bankers like to call it, a “[[yard]]”. [[Principal]] that was not, according to the loan, due to be repaid until 2023. Principal that was not in Revlon’s account with Citi, ''because Revlon didn’t have it''.