Did you originally make a purchase with them that they refunded to you? If so and based on your description, it sounds as though they may have sent you a payment rather than refunding you through the payment you originally sent. The reason I say this is because you would have only had the option to "Issue refund" if it was a payment sent to you. To resolve this, they either need to go back to the payment you originally sent and "Issue refund" or send you another payment. If they actually use the refund feature, the money will automatically return to your card or to your PayPal balance depending on how you made the purchase. If they send you another payment, the money will go to your PayPal balance.
I hope this helps and thank you for joining the Community!
If this post or any other was helpful, please enrich the community by giving kudos or accepting it as a solution.