KBRA Affirms Ratings for BlackRock TCP Capital Corp.

KBRA affirms the issuer and senior unsecured debt ratings of BBB- for BlackRock TCP Capital Corp. (NASDAQ: TCPC or "the company"). The rating Outlook is Stable.

Key Credit Considerations

The ratings are supported by TCPC’s ties to BlackRock, Inc.'s (NYSE: BLK) $220 billion credit platform further enhanced by BLK's recent acquisition of HPS Investment Partners ("HPS"). At the time of acquisition, HPS had $148 billion of assets focused on direct lending, boosting direct lending assets to $122 billion, which strengthens the BlackRock Credit platform through scale, as well as adding senior leadership to the investment committee and an experienced workout team.

TCPC maintains SEC exemptive relief to co-invest among certain BlackRock credit affiliates and investment vehicles, allowing TCPC to compete in the highly competitive industry through size and scale. Also supporting the ratings is the company’s diversified $1.8 billion investment portfolio at fair value (FV), comprised of 153 portfolio companies across 20+ sectors with a high percentage (82.4%) of senior secured first lien loans, reflecting a strategic shift to focus on loans highest in the capital structure. TCPC focuses on investing in the core middle market (portfolio companies with $25 million-$125 million EBITDA), a comparatively less competitive segment with higher yields than the upper middle market segment. The top three portfolio sectors, generally considered less cyclical, are Internet Software & Services (13.6%), Software (13.0%), and Diversified Financial Services (11.7%). Furthermore, the company is focused on limiting individual portfolio company concentrations and divesting its senior secured second lien investments (6.9%).

The company has solid access to the capital markets and a diversified funding mix of secured bank revolving facilities, unsecured senior debt, and SBA debentures. At 2Q25, the ratio of secured debt to gross assets was 16.5%, which is lower than peers, and unsecured debt to total debt was high at ~73%, providing financial flexibility in weaker markets and less encumbered collateral for the benefit of the unsecured noteholders. As of June 30, 2025, the company’s gross and net (of cash) leverage were relatively high at 1.43x and 1.29x, respectively, above the company's target net leverage range of 0.90x-1.20x, though elevated leverage is likely temporary and is due to recent portfolio markdowns as well as quarter-end timing of investment repayments rather than due to a shift in overall risk management. Likewise, asset coverage is low at 169.8% when considering its 150% regulatory asset coverage requirement, providing the company with a 13% cushion to withstand a moderate increase in market volatility in a less favorable economic environment. As of June 30, 2025, TCPC had adequate liquidity, including $107.3 million cash and $455 million in available bank credit lines, set against $153.6 million of unfunded portfolio company commitments and $417 million of unsecured debt due within two years ($92 million in December 2025 and $325 million in February 2026). The $325 million note was prefunded by the July 2025 $325 million issuance. TCPC is likely to refinance some of the remaining $92 million using its secured bank credit lines.

Counterbalancing rating strengths is the comparatively high level of non-accruals at 10.4% and 3.7% as a percentage of total investments at cost and FV, respectively, as of 2Q25. These ratios improved moderately from 1Q25 levels and total investments on non-accrual status are expected to continue to decline slowly over time via exits and restructurings. The company had eight portfolio companies on non-accrual status at 2Q25, unchanged from 1Q25. Additional risks generally for BDCs include illiquid assets, retained earnings constraints as a regulated investment company ("RIC"), and uncertain economic environment with high base rates, inflation, and geopolitical risks.

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 that has elected to be treated as a business development company operating under the Investment Company Act of 1940 and as a RIC for tax purposes, which, among other things, must distribute to its shareholders at least 90% of the company's investment company taxable income. The advisor ("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

Given the Stable Outlook, a rating upgrade is not expected in the medium term. A rating downgrade and/or Outlook change to Negative could be considered if management alters its stated company strategy by increasing focus on riskier investments coupled with higher leverage metrics. The Stable Outlook reflects an expectation that TCPC’s non-accruing loan levels will continue to improve over time. Material credit degradation within the loan portfolio as well as long-term maintenance of elevated leverage could also precipitate negative rating action.

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