What is the ruling on a loan of alcohol (khamr) between two non-Muslim subjects (Dhimmi) if one or both subsequently embrace Islam?

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The loan agreement is nullified (batala). Nothing becomes obligatory upon the borrower, regardless of whether the borrower or the lender became Muslim. This is because upon embracing Islam, alcohol cannot be a legally binding obligation upon the new Muslim due to its lack of monetary value (maliyyah). Consequently, nothing is owed in exchange because it holds no intrinsic value. This is evidenced by the fact that if this item were destroyed, there would be no liability for its replacement.