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Photo of Revlon products

It took less than a day for Citigroup Inc.’s now-infamous payment error to Revlon Inc. lenders to come up in the cosmetics giant’s bankruptcy.

The bank’s two-year-old blunder—in which it wired the balance of a $900 million loan rather than just the interest, and then failed to get most of it back when investors claimed Revlon was in default and should have repaid them anyway—will likely impede the company’s restructuring plans, court papers show. The problem: It’s not clear who, if anyone, has the rights to the repayment of the remaining $500 million of loan principal caught up in an ongoing court battle over the accidental transfer.

After losing the first round of the fight last year with lenders who kept the erroneous payment, Citigroup said it assumed rights as a creditor to the troubled company. But Revlon has hinted—in a regulatory filing last month and bankruptcy court filings this week—that Citigroup’s claim to the cash is not certain, leaving the door open for yet another head-spinning debt clash.

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