Another cockroach crawls out of the woodwork...

In the grand tradition of Wall Street's endless parade of "resilient" investments that evaporate faster than a hedge fund's excuses, BlackRock - that $10 trillion behemoth masquerading as a fiduciary - has just discovered the hard way that private debt isn't quite the "uncorrelated" panacea it's been hawking to pension funds and the terminally optimistic.

Bloomberg reports that a mere month ago, the iShares overlords were marking Renovo Home Partners' IOUs at a pristine 100 cents on the dollar, as if the Dallas-based kitchen-and-bathroom flipper was churning out profits like an OnlyFans 'influencer'.

Fast-forward to last week, and poof: valuation revised to a resounding zero.

Because nothing says "diversification" like watching your balance sheet get torched in a single earnings call.

Renovo, a Frankenstein's monster of a roll-up stitched together by private equity players at Audax Group back in 2022, didn't just stumble - it plunged into Chapter 7 oblivion, signaling a full liquidation shutdown.

Bloomberg notes that while BlackRock, ever the glutton for yield, gobbled up the lion's share of Renovo's $150 million private debt buffet, it was not alone.

Apollo Global's MidCap Financial and Oaktree Capital nibbled at the scraps, per whispers from those in the know who wouldn't dare attach their names to this private equity horror show.

No one with a Bloomberg terminal needed a crystal ball to see the dumpster fire brewing.

Back in April, the lenders - those paragons of patience - took haircuts, swapped loans for equity confetti, and prayed a recap would resurrect the zombie.

By Q3, they even greenlit "payment-in-kind" interest deferrals.

Regulatory filings paint the picture: a desperate bid to keep the lights on while pretending the emperor had clothes.

Yet, as September wrapped, BlackRock and MidCap funds were still polishing their Renovo turds to a par-value shine, signaling to the world (or at least their NAV reports) that full repayment was as inevitable as the Fed's next pivot.

Ah, the magic of private debt mark-to-model - where liquidity is whatever you say it is, until it's not.

Enter Q4: the quarter where illusions go to die.

“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. 

Tseng, in a tone-deaf earnings confessional, admitted the inevitable:

"We expect to fully write down this position in the fourth quarter of 2025."

Because nothing screams confidence like pre-announcing a wipeout.

While the Renovo debt represents a mere sliver of total assets for the three lenders, Bloomberg concludes poignantly that 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.

Remember Zips Car Wash? Lenders marked it near-par for months before it imploded earlier this year. Or Tricolor Holdings and First Brands Group, those subprime auto and auto-parts cadavers that blindsided the Street, igniting a blame-game cage match over who peddled the shoddiest underwriting standards.

In private credit's shadow banking circus, where yields are chased like molly at a rave, Renovo's vaporization is less anomaly than canary in the coal mine... and to mix metaphors, we suspect more cockroaches are on their way, and the next one may not be a mere 'fleshwound'.