KBRA Downgrades Ratings for BlackRock TCP Capital Corp.

KBRA downgrades the issuer and senior unsecured debt ratings to BB+ from BBB- for BlackRock TCP Capital Corp. (NASDAQ: TCPC) or (“the company”). The rating Outlook is revised to Negative from Stable.

Key Credit Considerations

The rating downgrade reflects a material weakening in TCPC’s credit profile, driven by a significant fourth-quarter 2025 net asset value (NAV) decline, a re-acceleration of investments migrating to non-accrual status, elevated regulatory leverage, and weaker earnings. Collectively, these factors have reduced balance-sheet and funding flexibility that previously supported the investment-grade ratings. The Negative Outlook reflects KBRA’s expectation that credit risks will remain elevated amid continued asset quality pressure, with potential for additional valuation marks and sustained leverage above targeted levels in an uncertain operating environment.

On January 23, 2026, after market close, TCPC disclosed in an 8-K filing an expected approximately 19% quarter-over-quarter decline in NAV per share, representing a significant change to its investment portfolio. Management attributed roughly two-thirds of the NAV decline to a small group of long-standing challenged portfolio companies, many of which had previously undergone restructurings, with the remainder reflecting broader portfolio markdowns. As a result, investments on non-accrual status were estimated to increase to approximately 9.6% of total investments at cost and approximately 4.0% at fair value, following the addition of six portfolio companies to non-accrual status.

The decline in NAV has direct balance-sheet implications, including a meaningful increase in leverage. Management estimates that net regulatory leverage increased to approximately 1.45x at year-end 2025, with a total pro forma debt-to-equity of roughly 1.74x when including SBA debentures. This places TCPC’s leverage well above that of KBRA-rated BDC peers and management’s stated target range of 0.90x to 1.20x. While the company remains in compliance with regulatory asset coverage requirements and bank covenants, balance-sheet cushion has narrowed materially, reducing the company’s capacity to absorb additional adverse credit developments.

Liquidity remains adequate, supported by secured bank credit facilities that are expected to be used to repay the company’s $325 million senior unsecured notes maturing on February 9, 2026. Following this repayment, TCPC’s next material senior unsecured debt maturity is not until 2029. However, the increased reliance on secured funding will reduce the proportion of senior unsecured debt in the capital structure on a pro forma basis, reducing financial flexibility. Further, KBRA expects near-to-medium-term issuance of senior unsecured debt to be limited as management prioritizes stabilization of the investment portfolio and balance-sheet strength.

Partially offsetting these pressures, TCPC benefits from its integration within BlackRock, Inc.’s (NYSE: BLK) large and diversified private credit platform, which provides access to extensive credit infrastructure, capital markets expertise, and established banking relationships. Management has articulated a more conservative forward investment strategy focused on a more diversified portfolio comprised primarily of senior secured first-lien loans, greater lender influence, and reduced exposure to higher-risk legacy strategies. While KBRA views this strategic direction as credit positive, execution risk remains elevated, and the benefits of these changes are expected to take time to be reflected in credit metrics, particularly given constrained leverage capacity.

The Negative Outlook reflects KBRA’s expectation that asset quality pressure may persist over the near to medium term, given elevated non-accrual levels, a meaningful watch list, higher leverage, weaker earnings capacity, and a less favorable funding mix.

Formed in 2006 as a Delaware limited liability company and converted to a Delaware corporation in 2012, the company is a publicly traded closed-end, externally managed, non-diversified management investment company. TCPC has elected to be treated as a business development company under the Investment Company Act of 1940 and as a regulated investment company for tax purposes, which requires, among other things, the distribution of at least 90% of its investment company taxable income to shareholders. The adviser is Tennenbaum Capital Partners, LLC. In 2018, the adviser merged with a wholly owned subsidiary of BlackRock Capital Investment Advisors, LLC, an indirect wholly owned subsidiary of BLK, with the adviser as the surviving entity.

Rating Sensitivities

Additional rating pressure could result from further material NAV erosion, sustained leverage above targeted and peer levels, continued migration of investments to non-accrual status, and/or additional deterioration in liquidity or access to funding. Revision of the Outlook to Stable would require evidence of successful execution of strategic initiatives, including stabilization of asset quality and earnings, along with improved leverage metrics and funding flexibility.

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