Submitted by QTR's Fringe Finance

About a month ago, BlackRock told investors that the private loans it made to Renovo Home Partners were worth 100 cents on the dollar. Full recovery expected. Nothing to worry about. Last week, all of a sudden, those same loans were worth zero.

This is why I’m always harping on the idea that one day you can wake up, and everything can just be different. On the Friday before the regional banking crisis, things were fine. Then, Silicon Valley bank put out a press release saying they were selling equity and, by Monday’s open, regional banks were going bankrupt and needed a bailout. One day before Covid everything was fine, the next people were fist fighting over toilet paper at Costco.

Shit changes quickly in today’s markets. Sometimes in seconds. And no matter how much market bears, skeptics or cynics are ridiculed during the euphoria on the way up, eventually many of their warnings come to fruition. Most of the time, it’s just simple math.

Anyway, Bloomberg reported this morning that Renovo, a Dallas-based roll-up of regional kitchen and bath remodelers created by Audax Group in 2022, filed for Chapter 7 bankruptcy and plans to liquidate. BlackRock held most of Renovo’s roughly $150 million in private debt, while Apollo’s MidCap Financial and Oaktree owned smaller pieces. Just weeks after marking the debt at par, the entire position disintegrated.

It’s the private-credit version of the same game we’ve seen in subprime auto lending and regional banking: pretend the assets are fine until they vanish.

What the reality of a bankruptcy looks like to private credit marks

And, as I’ve said a million times, the dickless cowards running these companies will employ any scheme or bullshit nonsense they can think of to avoid admitting they’ve made horrible investments and to put off ugly consequences for literally one more minute. They’ll stretch accounting rules, invent new jargon, refinance the same corpse five different ways — anything to pretend it’s fine for one more quarter before reality shows up with a crowbar.

As I wrote back in October, private-credit funds have kept zombie borrowers alive with covenant waivers, extend-and-pretend deals, and payment-in-kind IOUs — the same toolkit now showing up in the Renovo mess.

Back in April, lenders already knew Renovo was in trouble. They’d agreed to...(READ THIS FULL COLUMN 100% FREE HERE).

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