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Well, it was fun while it lasted: For two years, a group of hedge funds had a half-billion extra dollars to play with while pretending they could not possibly have any idea that Citigroup hadn’t meant to send them all of the money they were owed by a seriously underwater company instead of a routine coupon payment. Then, back in September, a federal appeals court found that the hedge funds’ argument was cute—indeed, nearly cute enough to win, but ultimately too cute, and obviously they had to return money they’d have to have been braindead to believe really belonged to them.
That didn’t have to be the end of this delightful story. The hedge funds could have appealed, and if they lost could have appealed again to the Supreme Court. But pursuing probably lost causes costs money—a lot of money given the kinds of lawyers Brigade Capital Management and the rest use—and fun as it would be to rub Citi’s nose in its own incompetence before the highest court in the land might be, hedge funds are in the business of mitigating rather than multiplying losses (usually), and so there shall be no more fun arguments over who is being more disingenuous. Probably.
The order of dismissal came Monday after the last holdouts among the lenders agreed to return their share of $504 million the creditors still had following Citigroup’s victory in court…. There is still a chance the Dickensian case has some life left in it. In his order Monday, Furman gave the parties 60 days to reopen the action “if the settlement is not consummated.”
Oh, and about those losses: They’re going to be pretty significant.
The [debt restructuring] calls for doling out ownership stakes in Revlon to secured lenders, while mostly wiping out the company’s lowest-ranking creditors and leaving existing stockholders with nothing.
The restructuring agreement, which must be approved by a U.S. bankruptcy judge before it takes effect, would provide $44 million to Revlon’s unsecured creditors, who would otherwise be last in line for repayment of their debts.
Citigroup’s $900 Million Revlon Blunder Ends With a Dismissal After Bank’s Victory [Bloomberg]
Revlon’s Bankruptcy Plan Would Wipe Out Stockholders, Hand Ownership to Lenders [Bloomberg via Yahoo!]
Revlon and key creditors strike deal, April bankruptcy exit [Reuters via Yahoo!]
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