About a month ago, BlackRock valued its private equity debt to struggling home improvement company Renovo Home Partners at 100 cents for every dollar. As of last week, the company's latest assessment results were zero. The sharp decline comes as Dallas-based Renovo — formed by private equity firm Audax Group, which consolidated several regional kitchen and bathroom remodeling businesses in 2022 — suddenly filed for bankruptcy last week, indicating plans to close its doors. According to people familiar with the matter, BlackRock holds most of Renovo's private equity debt of about 150 million US dollars, and MidCap Financial, a subsidiary of Apollo Global Management Inc. and Oak Capital, hold a small portion. It's no secret that Renovo is in trouble. People familiar with the matter said that in April, the lender agreed to bear losses and convert part of the loan into equity as part of the restructuring plan to help the company get back on track. Regulatory documents show that in the third quarter, they also agreed that the company would defer payment of cash interest on the restructuring debt. This arrangement is also known as in-kind payments. However, by the end of September, funds managed by BlackRock and MidCap Financial were still evaluating Renovo's new bonds at face value, which usually means investors can expect full repayment. After just a few weeks, the situation took a sharp turn for the worse. “At the beginning of the fourth quarter, due to the company's own performance and liquidity issues, Renovo's board of directors decided that the best course of action was to enter the liquidation process,” Philip Tseng, CEO of BlackRock TCP Capital Corp., said during the earnings call. “We expect to fully write down this position in the fourth quarter of 2025.” Apollo managing director Ted McNulty said on the MIDCAP Financial Investment Corp. Fund's earnings call that the company “learned” Renovo would file for bankruptcy at the end of October. Although Renovo debt accounts for a small share of the three lenders' total assets, the company's sudden collapse directly hit the core issue that critics say is one of the major weaknesses in the private equity market: the disconnect between the valuation of illiquid loans and the operating conditions of the underlying business.

About a month ago, BlackRock valued its private equity debt to struggling home improvement company Renovo Home Partners at 100 cents for every dollar. As of last week, the company's latest assessment results were zero. The sharp decline comes as Dallas-based Renovo — formed by private equity firm Audax Group, which consolidated several regional kitchen and bathroom remodeling businesses in 2022 — suddenly filed for bankruptcy last week, indicating plans to close its doors. According to people familiar with the matter, BlackRock holds most of Renovo's private equity debt of about 150 million US dollars, and MidCap Financial, a subsidiary of Apollo Global Management Inc. and Oak Capital, hold a small portion. It's no secret that Renovo is in trouble. People familiar with the matter said that in April, the lender agreed to bear losses and convert part of the loan into equity as part of the restructuring plan to help the company get back on track. Regulatory documents show that in the third quarter, they also agreed that the company would defer payment of cash interest on the restructuring debt. This arrangement is also known as in-kind payments. However, by the end of September, funds managed by BlackRock and MidCap Financial were still evaluating Renovo's new bonds at face value, which usually means investors can expect full repayment. After just a few weeks, the situation took a sharp turn for the worse. “At the beginning of the fourth quarter, due to the company's own performance and liquidity issues, Renovo's board of directors decided that the best course of action was to enter the liquidation process,” Philip Tseng, CEO of BlackRock TCP Capital Corp., said during the earnings call. “We expect to fully write down this position in the fourth quarter of 2025.” Apollo managing director Ted McNulty said on the MIDCAP Financial Investment Corp. Fund's earnings call that the company “learned” Renovo would file for bankruptcy at the end of October. Although Renovo debt accounts for a small share of the three lenders' total assets, the company's sudden collapse directly hit the core issue that critics say is one of the major weaknesses in the private equity market: the disconnect between the valuation of illiquid loans and the operating conditions of the underlying business.