Sector developments and company hires

Controversial Revlon decision reversed
The US Circuit Court for the Second Circuit last week reversed the controversial decision by the District Court for the Southern District of New York (SDNY) that permitted lenders to retain the mistaken payment made by Citi as administrative agent for a credit agreement with Revlon (SCI 20 August 2020). The SDNY decision upended decades of loan market practice that mistaken payments are routinely returned. It also led the LSTA to develop a widely-adopted standard erroneous payment provision for credit agreements, designed to prevent such situations from occurring again.

On 11 August 2020, Citi intended to make an interest payment on the Revlon credit agreement, but mistakenly wired almost US$900m - representing the full amount of the interest and principal outstanding - of its own money to the lenders. Although many lenders returned the funds, several did not, invoking the ‘discharge for value’ defense that permits recipients of mistaken payments to retain such funds under limited circumstances.

The Second Circuit’s opinion held that the lenders could not rely on the discharge for value defense because they had ‘constructive notice’ of the mistake and because it does not extend to loans that are not yet due. The LSTA notes that the Second Circuit’s decision conforms to long-standing market norms and, together with its new provisions, will result in a return to certainty for the disposition of mistaken payments.

EMEA
DLA Piper has appointed a new legal director to its finance, projects and restructuring team in Johannesburg, South Africa. Amelia Heeger joins the team with more than 20 years of experience in multiple financial mandates, including securitisation. Previously, she was a freelance legal advisor, having been a partner at Baker & McKenzie.