When Citi accidentally sent $900-million to Revlon lenders in August 2020 and later failed to get most of it back, the bank said it became a lender to Revlon, effectively stepping into the shoes of funds who refused to return about $500-million of the mistaken payment. But Revlon has since hinted that it may challenge Citi’s status as a creditor, prompting Citi to file suit in bankruptcy court on Friday.

Citi is asking Revlon’s bankruptcy judge to dispel any doubt about its right to repayment under the Revlon term loan. Because it had no obligation to pay down Revlon’s debt, denying the bank its rights as a creditor would let Revlon “escape liability for its own debt obligations”, lawyers for Citi wrote in the complaint.

The bank was not aware that anyone would challenge its status as a creditor until days before the cosmetics company filed for Chapter 11 protection in June, according to court papers. It was then that Revlon and some of its creditors refused to acknowledge the bank’s rights as a secured lender in the company’s bankruptcy financing package.

“Unsurprisingly, neither the Revlon Group nor any other party-in-interest had ever articulated any legitimate legal or factual basis for challenging Citibank’s subrogation rights for inclusion in the DIP Orders,”  lawyers for Citi wrote. “There is none.” 

Representatives for Revlon didn’t immediately respond to a request for comment on Monday. BM