If they declare bankruptcy and restructure the obligations while the case is pending, Brigade would have been forced to take a loss on the loan. If they try to argue for the money as repayment for the debt, a bankruptcy court could claw back the money and redistribute according to the capital structure (akin to what happened during the Madoff resolution)
What's even more interesting is that you're right that a clawback like that might actually happen. In theory, justice is blind. In practice, lots of courts exercise deep justice jurisprudence, and it's hard to argue Citi should get its money before Revlon's employees or similarly worthy parties.
That actually plays to Brigade's benefit slightly, I think. If this risk is there, Citi will definitely want to settle quickly.
Lawyers from Brigade and Citibank calculate Brigade's odds of winning. Let's say both sides agree it's 5%. That means the expect returns on litigating this are $8.75 million to Brigade. The cost of litigation is $2 million. The two sides discuss. They settle for anywhere between $6.75 and $10.75 million, depending on who negotiates better. That's where neither side wants to litigate.
For being a little bit douchey, Brigade walks out a few million ahead.
If sides can't agree (e.g. Citibank lawyers estimates 1% odds of winning and Brigade 10% odds), they go to court. But 9 times out of 10, it's a settlement like that.