About a month ago, BlackRock Inc. deemed the private debt it had extended to Renovo Home Partners, a struggling home improvement company, to be worth 100 cents on the dollar. As of last week, the firm had a new assessment: zero. The drastic revision comes as Dallas-based Renovo — a roll-up of regional kitchen and bathroom remodeling businesses created by private equity firm Audax Group in 2022 — abruptly filed for bankruptcy last week, indicating it plans to shut down. BlackRock held the majority of Renovo’s roughly $150 million of private debt, while Apollo Global Management Inc.’s MidCap Financial and Oaktree Capital Management held smaller chunks, according to people with knowledge of the matter, who asked not to be identified discussing a private transaction. It was no mystery Renovo was in a tough spot. In April, lenders had agreed to take losses and convert some of their loans into equity as part of a recapitalization that was supposed to give the company a chance to turn its business around, the people said. In the third quarter, they also allowed for deferred cash interest payments on its restructured debt, an arrangement known as payment-in-kind, regulatory filings show. Yet at the end of September, funds managed by BlackRock and MidCap Financial were still marking the new Renovo debt at par, which typically indicates investors expect to be paid back in full. It took only a few weeks for the situation to quickly unravel. “Early in the fourth quarter, company-specific performance and liquidity issues led the Renovo board to determine that the best available path forward was a liquidation process,” Philip Tseng, chief executive officer of BlackRock TCP Capital Corp., said during an earnings call. “We expect to fully write down this position in the fourth quarter of 2025.” Apollo’s Ted McNulty, a managing director, said during an earnings call for the MidCap Financial Investment Corp. fund that the firm “became aware” that Renovo would be filing for bankruptcy at the end of October. Spokespeople for BlackRock and Apollo declined to comment further. A representative for Oaktree declined to comment. While the Renovo debt represents a sliver of total assets for the three lenders, its sudden collapse strikes at the heart of what critics see as a major vulnerability in the private credit market: the disconnect between the valuation of illiquid loans and the performance of the underlying companies. Zips Car Wash similarly enjoyed marks that were near par from its private credit lenders months before filing for bankruptcy earlier this year. It also comes in the wake of the collapses of subprime auto lender Tricolor Holdings and car-parts manufacturer First Brands Group, which have caught investors off guard. They’ve stoked fears there could be more pain to come in credit markets and led Wall Street executives to trade shots as to who is to blame for poor underwriting standards. Renovo’s main borrowing entity, HomeRenew Buyer Inc., filed for Chapter 7 bankruptcy last week, listing liabilities of between $100 million and $500 million and assets of under $50,000. “We view this outcome as a result of issues specific to the issuer, rather than a reflection of broader sector weakness,” Tseng said about Renovo during the earnings call for BlackRock TCP Capital, one of the firm’s private credit funds.