On December 31, 2025, Blue Owl Capital Corporation (OBDC) and Blue Owl Capital Corporation II (OBDC II) carried a combined $172 million in par value of loans to a company called Loparex Midco B.V. Those loans were marked at a fair value of $153 million (90.7 cents on the dollar). Six months later, they were worth $10.4 million. Five cents on the dollar.
The news created some waves, but this isn’t really a story about one lender getting one loan wrong. Blue Owl may have been acting entirely in good faith, and every individual mark may have been technically defensible under the applicable accounting framework.
That’s the problem.
Whether Blue Owl got Loparex wrong is nearly beside the point (OBDC’s total position before the write-down was ~1.4% of total assets). The more interesting question is whether anyone outside Blue Owl could have known it was wrong.
And the most interesting question of them all is what that means for a $1.8 trillion private credit market.
There is no continuously observable price telling investors what a private loan is actually worth. Instead, there is an appraisal-like process: management estimates fair value, an independent valuation firm reviews the methodology, auditors test the process, and investors receive the number with a three-month delay.
A mark can be perfectly reasonable under accounting rules and still turn out to be spectacularly disconnected from economic reality.
Check out this Medallia chart:
And here’s the story on that loan:
The counter-argument, of course, is that public opinion can be spectacularly disconnected from economic reality too. But in the public markets, at least, investors have the option to trade on that information (or sell and cut their losses). That latter option is not available to investors in OBDC II, which also holds the Loparex loan.
Speaking of OBDC II:
The private credit ecosystem asks investors to treat internally generated estimates as if they were observable market prices. Unfortunately, we have very little way of knowing how wrong those estimates are (until something breaks).
What Happened
Back to issue at hand. Loparex makes very decidedly non-software things like engineered films and silicone release liners. That’s the backing you peel off a label or a bandage. (I too, had no idea what they were called).
In August 2019, Pamplona Capital Management acquired the company with roughly $600 million in debt, implying leverage of approximately 7.6x EBITDA. A bolt-on acquisition a few months later pushed leverage closer to 8x.
Enter our protagonist, Blue Owl, then Owl Rock Capital Corporation, who underwrote the second-lien loan at closing. This was a direct origination. Blue Owl held it exclusively across two BDCs: $112 million of the second lien on OBDC’s books; and $28 million on the books of its smaller sibling, OBDC II (4:1 investment ratio, that split will remain constant throughout the years).
A second tranche was added for the bolt-on. Combined par across both vehicles: approximately $172 million. For the next four years, the positions were carried near par.
The Restructuring
I’ll spare you the full saga of what Covid —> supply chain issues —> cost increases did to the financials of the borrower. Suffice it to say the company, saddled with substantial leverage, has not done well.
By January 2024, every party in the capital structure had retained restructuring counsel. In March’24, Loparex executed one of the year’s most aggressive liability management exercise (LME). This was an uptier transaction (when some creditors get priority over others).
From Octus: “Loparex completed a liability management exercise in 2024. In the first stage of the Loparex transaction, 75% of the first lien lenders provided $135 million of new money in the form of tranche A of a new superpriority term loan facility due February 2027.
They also swapped their $334 million of the $354 million U.S. dollar S+450 bps first lien loan due July 2026 and $76 million of the $194 million euro E+525 bps first lien loan due July 2026 for first-out with a total principal of $175 million, $280 million of S+450 bps second-out term loan and $120 million of S+450 bps third-out term loan.”
In plain English: the deal created a five-layer waterfall in repayment priority. The lenders who put up new money jumped to the front of the line. Everyone else got pushed down.
S&P downgraded the company to selective default, deeming the exchange tantamount to default because non-participating lenders received materially less than originally promised.
On April 12, 2024, S&P upgraded Loparex from SD to CCC+ with a negative outlook. The language in that report is not pretty, let’s put it that way. S&P explicitly stated that the capital structure remained “unsustainable” and assigned recovery ratings across the new tranches.
S&P’s recovery rating scale runs from ‘1’ (highest expected recovery, 90–100%) to ‘6’ (lowest, 0–10%). At origination in 2019, S&P assigned the second lien a ‘6.’ After the 2024 LME, S&P affirmed it.
Here’s the full post-restructuring picture:
Tranche A (superpriority new money): ‘B’ rating, ‘1’ recovery (90–100%)
First-out and second-out: ‘CCC+’ rating, ‘3’ recovery (50–70%)
Third-out and existing first lien (non-participating): ‘CCC-’ rating, ‘6’ recovery (0–10%)
Second lien: ‘CCC-’ rating, ‘6’ recovery (0–10%)
❓Pop quiz: which tranche did Blue Owl hold?
Yes, it was the very bottom one. $166 million of their $172 million total exposure (96%) sat in the second lien.
Monroe Capital
If you are doing mental math, you know we’re missing some $400 million dollars in loans (the company was purchased with ~$550 million in debt, Blue Owl’s exposure was around $172 million), so I tried looking for the “missing” money.
Monroe Capital Income Plus Corporation, a small BDC managed by Monroe Capital, held a tiny piece of Loparex’s original first-lien term loan (about $754,000 in par, acquired in April 2023.)
Pocket change compared with Blue Owl’s combined $166 million second lien.
But Monroe’s marks tell a story that Blue Owl’s don’t: