BlackRock TCP Capital Downgraded to 'BB' by Fitch Ratings

Fitch Downgrades BlackRock TCP Capital on NAV Concerns

Fitch Ratings has downgraded BlackRock TCP Capital Corp.’s long-term issuer default and debt ratings to 'BB' from 'BB+', placing the company on Rating Watch Negative. The action stems from an anticipated 19% decrease in its net asset value (NAV), which is expected to significantly reduce its asset coverage cushion.

Overview of Financial Pressures

The company's leverage is projected to increase to 1.74x by year-end 2025, with net regulatory leverage rising to 1.45x, substantially exceeding its internal target range of 0.9x-1.20x. Fitch also highlighted deteriorating asset quality, with non-accrual investments expected to reach 4.0% of the portfolio. Net realized losses were notably high at 12.1% of the average portfolio for the first nine months of 2025, far above the peer average for business development companies (BDCs).

Economic and Market Impact

Dividend coverage is forecast to face pressure in 2026 due to tighter spreads, potential rate cuts, and the expiration of a partial management fee waiver. Additionally, the company must address $325 million in unsecured notes maturing in February 2026. The plan to refinance using revolving facilities is expected to weaken its liquidity position and negatively impact earnings capacity.

Summary Outlook

Fitch indicated that a failure to reduce leverage, enhance asset coverage, or improve dividend coverage could lead to further negative rating actions. The downgrade reflects a broader deteriorating sector outlook for BDCs in 2026, driven by elevated interest rates and challenging macroeconomic conditions.

FAQ

Q: Why did Fitch downgrade BlackRock TCP Capital?
A: The downgrade was driven by an expected 19% drop in its Net Asset Value (NAV), rising leverage beyond its target, deteriorating asset quality, and pressure on its ability to cover dividends.

Q: What is BlackRock TCP Capital's new rating?
A: Its new long-term issuer default rating is 'BB', down from 'BB+', with a Rating Watch Negative outlook, suggesting a potential for further downgrades.

Source: Investing.com