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

Fitch Ratings affirmed the 'BB' Long-Term Issuer Default Rating for BlackRock TCP Capital Corp. (NASDAQ:TCPC) but revised the company's rating outlook to Negative from Stable. The ratings agency also removed TCPC from a Rating Watch Negative, signaling that while immediate downgrade risks have subsided, longer-term pressures on credit quality and leverage remain.

Asset Quality and Profitability Risks

The Negative outlook primarily reflects Fitch's concerns over TCPC's asset quality and earnings profile. The business development company (BDC) continues to report elevated levels of non-accrual investments and paid-in-kind (PIK) income, which could lead to future realized losses.

Key metrics highlighted by Fitch as of the first quarter of 2026 include:

• Non-accrual loans: 3% of the debt portfolio at fair value and 8.4% at cost, which Fitch considers above average.
• Asset coverage cushion: 10.9%, a level the agency views as weaker than that of its peers.
• Net realized losses: Reached 17.9% of the average portfolio at fair value in 2025 before moderating to 2.3% in the first quarter of 2026.

In a move to strengthen its financial position, TCPC reduced its quarterly base dividend to $0.17 per share from $0.25 per share in the first quarter of 2026.

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Leverage and Funding Profile

Fitch noted that TCPC's leverage has been trending downward but remains high relative to its risk profile and peers. As of the end of Q1 2026, statutory leverage was 1.65x and net regulatory leverage was 1.29x, down from 1.74x and 1.41x at year-end 2025, respectively.

The firm's funding mix has also shifted. In Q1 2026, TCPC refinanced $325 million in maturing senior unsecured notes using its secured revolving credit facility. This action significantly reduced its reliance on unsecured funding, with unsecured debt falling to 34.8% of total debt, compared to a four-year average of 61.7%.

Rating Affirmation Context

The decision to affirm the 'BB' rating and remove the Rating Watch Negative was based on Fitch's assessment that TCPC's credit metrics have stabilized. The downward trend in leverage and the reduction in non-accrual loans from their peak levels were key factors in this decision. As of the end of the first quarter, TCPC reported having $44 million in cash and $264 million in remaining borrowing capacity under its credit facilities.