SCHEDULE: Blue Owl Boosts Katapult Stake to 36.32% Amid Default Waiver

Sentiment:

Beneficial Ownership Update 6 October 2025 8:55 PM

Blue Owl Capital Holdings LP has significantly increased its beneficial ownership in Katapult Holdings, Inc. to 36.32% following a refinancing agreement and waivers related to an ongoing event of default.

Delay expectedThe company failed to maintain Minimum Trailing Three-Month Originations, leading to an Event of Default.Lenders provided a First Limited Waiver until September 29, 2025, and a Second Limited Waiver until October 13, 2025, effectively delaying the consequences of the default.

Capital raiseThe Issuer entered into an Amended and Restated Loan and Security Agreement for a Term Loan facility of $32,654,469.23.As a condition of this refinancing, New Warrants were issued to Blue Owl's Funds, allowing them to purchase 486,264 shares of Common Stock.Blue Owl's Funds also have the right to convert the Term Loan into 1,935,762 shares of Common Stock (Conversion Shares) due to an ongoing Event of Default.

Worse than expectedKatapult Holdings, Inc. failed to meet its Minimum Trailing Three-Month Originations covenant, indicating underperformance.The company required two limited waivers to avoid immediate consequences of an Event of Default, signaling financial distress.Despite the waivers, the default is considered continuing for conversion rights, allowing a significant debt-to-equity conversion that could dilute existing shareholders.

Summary

Blue Owl Capital Holdings LP now beneficially owns 2,603,447 shares of Katapult Holdings, Inc. common stock, representing 36.32% of the class.
This ownership includes 5,421 existing shares, 662,264 shares issuable from warrants, and 1,935,762 shares issuable from conversion rights.
The percentage is calculated based on 4,569,546 shares outstanding as of August 8, 2025, plus the warrant and conversion shares.
Katapult Holdings, Inc. entered into an Amended and Restated Loan and Security Agreement on June 12, 2025, providing a Term Loan of $32,654,469.23 maturing on December 4, 2026.
As a condition of the refinancing, Blue Owl's managed funds received New Warrants to purchase 486,264 shares at $0.01 per share, exercisable from September 29, 2025.
An additional 160,000 Transferred Warrants (from Midtown Madison Management LLC) were assigned to Blue Owl's funds on July 21, 2025, exercisable at $0.25 per share.
Blue Owl's funds have the right to convert the Term Loan into Common Stock (Conversion Shares) upon an Event of Default or after June 30, 2026.
Katapult failed to maintain Minimum Trailing Three-Month Originations, triggering an Event of Default.
Lenders issued a First Limited Waiver on September 15, 2025, and a Second Limited Waiver on September 29, 2025, temporarily waiving the default until October 13, 2025.
Despite the waiver, the Existing Default is considered continuing for conversion rights, allowing Blue Owl's funds to acquire 1,935,762 Conversion Shares immediately.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the company's failure to meet financial covenants, requiring waivers, and the potential for significant shareholder dilution from debt conversion. While financing was secured, the underlying operational issues and the nature of the financing (debt conversion due to default) are concerning.

Positives

Katapult Holdings, Inc. secured a Term Loan facility of $32,654,469.23, providing necessary financing.
The company received temporary waivers for an Event of Default, preventing immediate acceleration of the loan or other severe consequences.
Blue Owl Capital Holdings LP, a significant investor, has increased its stake, potentially signaling long-term commitment.

Negatives

Katapult Holdings, Inc. failed to meet a loan covenant (Minimum Trailing Three-Month Originations), indicating operational challenges.
The company required two limited waivers for an Event of Default, highlighting ongoing financial distress.
The Event of Default, despite waivers, is deemed continuing for conversion rights, allowing Blue Owl to convert debt to equity, which could dilute existing shareholders.

Risks

Failure to maintain Minimum Trailing Three-Month Originations, indicating potential operational underperformance.
Risk of further Events of Default if financial covenants are not met after the waiver period (October 13, 2025).
Potential for significant shareholder dilution if Blue Owl Capital Holdings LP converts its Term Loan into 1,935,762 Common Shares.
The Term Loan matures on December 4, 2026, requiring future refinancing or repayment.

Future Outlook

Blue Owl Capital Holdings LP reserves the right to propose or participate in future transactions, including extraordinary corporate transactions like mergers, reorganizations, liquidations, or significant asset sales. They also retain the right to change investment intent, acquire additional securities, or dispose of their holdings.

Industry Context

This filing indicates a company (Katapult Holdings, Inc.) in a challenging financial position, requiring refinancing and waivers for covenant breaches. This could reflect broader difficulties in the consumer finance or fintech sector, particularly for companies reliant on specific origination volumes, or it could be company-specific. The involvement of a large investment manager like Blue Owl Capital suggests a distressed or special situations investment.

Related Party Transactions

Midtown Madison Management LLC, previously an agent for the existing credit facility, assigned 160,000 warrants to Blue Owl's Funds. This suggests a relationship between Midtown Madison and the credit facilities.

Stakeholder Impact

Shareholders: Potential for significant dilution if Blue Owl Capital Holdings LP converts its Term Loan into Common Stock. The company's financial distress and covenant breaches could negatively impact share value.
Creditors (Blue Owl's Funds): Have secured a significant equity stake potential and warrants, improving their position in a distressed situation.
Management: Faces pressure to improve operational performance and meet financial covenants to avoid further defaults.

Next Steps

Katapult Holdings, Inc. must address the underlying issues that led to the failure to maintain Minimum Trailing Three-Month Originations.
The company needs to ensure compliance with loan covenants by October 13, 2025, when the current waiver expires.
Blue Owl Capital Holdings LP may exercise its right to convert the Term Loan into Common Stock, potentially increasing its ownership and diluting other shareholders.
Blue Owl Capital Holdings LP may engage in further transactions, including acquiring or disposing of shares, or proposing corporate actions.

Key Dates

Date	Description
March 6, 2023	Original issuance date of Transferred Warrants to Midtown Madison Management LLC.
June 12, 2025	Signing Date of the Amended and Restated Loan and Security Agreement (Refinancing Agreement) and issuance of New Warrants.
July 21, 2025	Midtown Madison Management LLC assigned Transferred Warrants to Blue Owl's Funds.
August 8, 2025	Date for which 4,569,546 shares of Common Stock were reported outstanding in the Issuer's 10-Q.
August 13, 2025	Date Issuer's 10-Q was filed with the SEC.
September 15, 2025	Date of the First Limited Waiver for an Event of Default.
September 29, 2025	Date New Warrants became exercisable and date of the Second Limited Waiver for an Event of Default.
October 13, 2025	Temporary waiver of Existing Default expires.
June 30, 2026	Earliest date for conversion rights to be exercised if no Event of Default occurs.
December 4, 2026	Maturity date of the Term Loan.
March 6, 2030	Expiration date of the Transferred Warrants.
June 12, 2032	Expiration date of the New Warrants.

Recommendation

sell

The filing reveals significant financial distress for Katapult Holdings, Inc., evidenced by its failure to meet loan covenants and the need for multiple waivers. While a term loan was secured, the fact that an Event of Default has occurred and is deemed continuing for conversion rights is highly concerning. This allows Blue Owl Capital to convert a substantial portion of debt into equity, leading to significant dilution for existing shareholders. The ongoing operational challenges (failure to maintain originations) and the looming expiration of the waiver on October 13, 2025, create substantial uncertainty and downside risk. A seasoned investor would likely view this as a deteriorating situation, warranting a sell recommendation to mitigate further losses.

Keywords

Katapult Holdings, Blue Owl Capital, SEC Filing, Schedule 13D, Beneficial Ownership, Term Loan, Warrants, Conversion Shares, Event of Default, Refinancing, Financial Covenants, Share Dilution

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