Fitch Revises BlackRock TCP Capital Outlook to Negative on Asset Quality Concerns

Fitch Ratings affirmed the 'BB' Long-Term Issuer Default Rating for BlackRock TCP Capital Corp. (NASDAQ: TCPC) but revised the company's outlook to Negative from a previous Rating Watch Negative. The ratings agency cited stabilization in the business development company's credit metrics as the reason for removing the watch, but pointed to persistent credit quality and balance sheet risks for the negative outlook.

Rating Rationale

The Negative outlook reflects ongoing concerns about TCPC's asset quality and financial cushion. According to Fitch, the primary drivers include still-elevated non-accrual loans and a high level of paid-in-kind (PIK) income, which may signal future realized losses. The ratings agency also noted that TCPC's asset coverage cushion, a key measure of a BDC's ability to absorb losses, remains weaker than that of its industry peers.

Fitch's removal of the Rating Watch Negative indicates a belief that TCPC's metrics have stabilized after a period of pressure. However, leverage, while trending down, is still considered elevated relative to the company's risk profile.

Key Financial Metrics

TCPC has shown some improvement in deleveraging, but key indicators remain under scrutiny. Fitch highlighted the following metrics from the first quarter of 2026:

Ad

• Leverage: Statutory leverage was 1.65x and net regulatory leverage was 1.29x, down from 1.74x and 1.41x at year-end 2025, respectively.
• Asset Quality: Non-accrual investments remained above average, accounting for 3% of the debt portfolio at fair value and 8.4% at cost.
• Losses: Net realized losses were a significant 17.9% of the average portfolio in 2025, though this moderated to 2.3% in the first quarter of 2026.
• Coverage Cushion: The asset coverage cushion stood at 10.9%.

Balance Sheet and Capital Actions

In response to financial pressures, TCPC has made several strategic adjustments. The company cut its base quarterly dividend to $0.17 per share from $0.25 in the first quarter of 2026 to preserve capital.

TCPC also refinanced $325 million of maturing senior unsecured notes using its secured revolving credit facility. This move significantly altered its funding mix, causing unsecured debt to fall to 34.8% of total debt, a sharp decrease from its four-year average of 61.7%. A lower proportion of unsecured debt can reduce a company's financial flexibility. As of the end of the first quarter, TCPC reported $44 million in cash and $264 million in available borrowing capacity.