IMHO – this is actually more difficult than a lot of you are making out.
Wheels were borrowed and you have a duty of care for those wheels and as such should replace them.
However – presumably if he is a mate and did willingly loan them too you he may well have recognised you ‘wouldn’t / couldn’t’ afford to replace them should they get broken. So there is some responsibility there too. OK so it is a moral rather than a legal responsibility but it is still important.
Also worth bearing in mind is the imapact of his loss. How important are those wheels to him? If very important, he would not have lent them?
I guess it is down to you and him to have a chat and agree on suitable and acceptable compensation. What can each of you do to lessen the impact of the loss?
There is definately a moral here, and it revolves around the old statement ‘never a borrower nor a lender be.’
Sorry – probably not helpful but, i hope balanced. Good luck. You do have my sympathy.