It seems like that perhaps makes it more likely everyone will want to settle quickly. Settlement money shouldn't be subject to a clawback, so Revlon comes out ahead. And a clawback doesn't help Citi either -- they're out the full sum. At that point, Citi's money flows to help Revlon's creditors.
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.
As I understand the situation from the article, Revlon is not a party to the case. It is therefore irrelevant if Revlon becomes bankrupt. Clawback provisions would not extend to a transaction between Brigade and CitiBank. IANAL
Re:Citibank's $900M Blunder
by lifeisstillgood on Thursday August 20, 2020 @03:56PM
(#24228042)
So while this dispute is ongoing, Revlon has an extra 175M of someone else's money that could be brought into play during their bankruptcy- so they actually have an incentive to declare early?
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)