This is kinda a pet peeve of mine. I NEVER loan out anything that I'm not willing to just give away. Sometimes people think I'm an ass because of that, but I've been burned too many times. You have to understand where the other guy is coming from also. It shouldn't matter if he was a friend or a stranger or a total a******, he was nice enough to loan you a tool and you lost it. Doesn't even matter if he's a dirtbag and you suspect he's the one who stole it, unless you can prove that, it's a moot point.
I'd expect at the very least equal, but if it were me I'd probalby go out and just give him a new one, because that's the way I was raised. You always return things in better condition than you recieved it. In this case, even if you go out and get him the exact same tool, in the same condition, same age. etc, he's still being cheated. It's like losing a 10 year old car and going out and replacing it with another 10 year old car. It might techinically be in the same condition, but the problem is it was used by someone else, so you have no idea how well it was taken care of. It's different than something you've used yourself and know the history.
Just be a bigger man and buy him a new one. And don't borrow any more tools anymore. It might cost you a little more now, but that's a cheap price to pay to keep a good reputation. If I had a friend that did this to someone else, I'd blacklist them from ever borrowing anything of mine again.
