Blue Owl slashes Loparex loan valuation as bankruptcy risk mounts

Blue Owl Capital has dramatically reduced the valuation of its loans to specialty materials maker Loparex, signaling heightened concerns about the creditworthiness of borrowers within the $1.8 trillion private credit sector, as reported by Bloomberg. The company's public arm, OBDC, has classified its exposure to Loparex as non-accrual following the second quarter, indicating uncertainty about investors' ability to fully recoup their investments.

This move followed Moody's Ratings designating Loparex as in default and warning of potential Chapter 11 bankruptcy proceedings. Loparex, financed by Pamplona Capital Management, has faced mounting debt pressures for years. OBDC's latest disclosures reveal a sharp decline in the value of its loans; the second-lien exposure has plummeted to around 5 cents on the dollar, down from approximately 63 cents at the end of March and roughly 88 cents by the end of 2025.

Even the first-lien loan, once near par, is now valued at only around 22 cents. This deterioration followed the collapse of a proposed merger aimed at injecting fresh capital into Loparex and bolstering its financial position. During OBDC's recent earnings call, President Logan Nicholson noted that the aborted deal would have provided a recapitalization and improved liquidity, but its failure prompted the valuation adjustments.

Loparex had approached private credit lenders for about $1.5 billion in refinancing earlier in the year, with some debt set to mature in early 2027. The company also missed an interest payment on its second-lien debt in June and remains under a forbearance agreement until September. While OBDC's overall non-accrual exposure remains relatively low at about 0.8% of fair value, the rapid devaluation of the Loparex loan underscores the swift decline of a previously near-par valued asset once a borrower faces financial distress.