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

Fitch Ratings has affirmed BlackRock TCP Capital Corp.'s (NASDAQ: TCPC) 'BB' credit ratings but has revised the company's outlook to Negative. The move signals a heightened risk of a future downgrade due to ongoing concerns over the business development company's leverage and the quality of its loan portfolio.

Key Rating Drivers

The Negative outlook is driven by several factors that pressure TCPC's credit profile, according to Fitch. The ratings agency highlighted still-elevated non-accrual loans and a significant amount of paid-in-kind (PIK) income, which could translate into additional realized losses for the BDC.

Fitch noted that as of the first quarter of 2026, TCPC's non-accrual investments remained above average, accounting for 3% of the debt portfolio at fair value and 8.4% at cost. The company's asset coverage cushion, a key measure of its ability to absorb losses, was 10.9%, which Fitch described as weaker than its peers.

Stabilizing but Elevated Metrics

Despite the negative revision, Fitch removed TCPC from its "Rating Watch Negative," indicating a belief that the company's credit metrics have stabilized. TCPC has made progress in reducing its debt load, with net regulatory leverage declining to 1.29x in Q1 2026 from 1.41x at the end of 2025.

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However, the ratings agency stressed that leverage remains high for TCPC's risk profile. The firm's financial performance has been challenged, recording net realized losses of 17.9% of its average portfolio in 2025, though this moderated to 2.3% in the first quarter of 2026.

Capital and Funding Adjustments

In response to financial pressures, TCPC has undertaken significant strategic actions. In the first quarter of 2026, the company reduced its quarterly base dividend to $0.17 per share from $0.25 per share in a move to preserve capital.

TCPC also altered its funding structure by refinancing $325 million in senior unsecured notes using its secured revolving credit facility. This action caused its reliance on unsecured debt to fall sharply to 34.8% of total debt, down from a four-year average of 61.7%, a shift that can reduce a firm's financial flexibility. At the end of the quarter, TCPC reported having $44 million in cash and $264 million in available borrowing capacity.