BlackRock TCP 19% NAV Reduction Driven by Loans Previously Marked Near Par; Fund Maintains Significant PIK Exposure; Near-Term Debt Refinancing Could Lead to Increased Cash Burn

Relevant Documents:
8-K
Q3’25 10-Q
 

On Jan. 23, business development company, or BDC, BlackRock TCP Capital Corp. announced that primarily due to significant fair value write-downs of investments in six portfolio companies, its net asset value per share was expected to fall 19% sequentially as of Dec. 31, 2025. Likely due to more than one of these six investments, loans on nonaccrual status would increase to 4% and 9.6% on a fair value and cost basis, respectively, up from 3.5% and 7% as of Sept. 30, 2025.

Following the announcement, The company’s stock sold off 11% as of the time of this publication. Over the last year, BlackRock TCP Capital Corp. stock is lower by 44% and trades at a market value to net asset value of 74% after adjusting the Sept. 30, 2025, net asset value for the 19% sequential decline.
 

Since Jan. 23, BlackRock TCP’s 6.95% bonds due 2029 are also off by about 2 points to 99 according to Solve. Yields are at 7.5%, based on the 99 price.

According to an Octus analysis of BlackRock TCP Capital Corp.’s portfolio and financials, a significant amount of the value reduction, which led to an approximate 19% sequential decline in net asset value, appears to have originated from many loans previously marked above 90% of par. BlackRock TCP said that write-downs of holdings in Edmentum, Razor Group, SellerX, HomeRenew / Revovo, Hylan and InMobi accounted for 67% of the implied $140.6 million reduction, which means that BlackRock TCP reduced the $157.7 million of fair value associated with debt and equity investments in these six positions as of Sept. 30, 2025, by 81% on average.
 

One of the positions, direct-to-home remodeling company HomeRenew / Renovo, BlackRock TCP previously disclosed that on Nov. 3 began a liquidation process, which was expected to result in no recovery value. Total exposure to HomeRenew as of Sept. 30 totaled $12.6 million of fair value. Debt in HomeRenew was marked at par. Although as previously discussed HomeRenew restructured its debt in the second quarter of 2025, so recorded principal as of Sept. 30 was lower than a year prior.

Both Hylan and SellerX loans were marked above 90% of par and Razor Group’s debt was marked at 82% of par as of Sept. 30.

Investment value detail for each of the six largest negative contributors to the fourth quarter decline is below:
 

Two of the largest contributors, Razor Group and SellerX, are Amazon and other ecommerce aggregators, which have faced years of pressure, exacerbated by tariffs in 2025. Octus previously analyzed the segment and found that facing continued pressure, sponsors and lenders have attempted to consolidate the largest companies through a series of in court and out of court restructurings. BlackRock TCP Capital Corp., via its investments in Razor Group, SellerX and Thrasio Group, was one of the largest BDC lenders to the space. Triplepoint, given its investments in Forum Brands and Merama, was also a significant lender. SellerX restructured out of court in the second quarter of 2025. Razor Group conducted a series of mergers with other struggling aggregators, each time restructuring debt for equity. In 2024, Razor Group merged with Perch Brands and in late 2025, it merged with Infinite Commerce. Yesterday, Jan. 26, Bloomberg reported that Apollo took a $170 million loss on its loans, which backed Victory Park Capital’s acquisition of Perch Brands.

BlackRock TCP likely wrote down a significant portion of its $36 million investment in the equity of education software provider Edmentum. New Mountain Finance Corp. explained in the third quarter that although its loans to Edmentum were “performing well,” its investment in subordinated loans was under pressure by the “expensive [senior] PIK securities,” adding that the BDC is in the process of exploring a capital structure refinancing to “reduce the overall cost of capital and limit future dilution.” The company did not elaborate on the refinancing, but based on BlackRock TCP’s write-down, it is possible the refinancing led to a significant cut to existing equity.

Interestingly, none of the six negative contributors were on nonaccrual status as of Sept. 30. However, as shown in the table above, much of the affected fair value on the six negative contributors was in equity securities and a significant portion of debt securities paid interest in kind. Therefore, while the potential move to nonaccrual status for these positions would affect reported income going forward, cash income would be only marginally affected.

Last week, Octus published an analysis of the BDC sector finding that more than half of BDCs did not generate enough cash flow to cover stated dividends over the last 12 month period ending Sept. 30, 2025. BlackRock TCP Capital Corp. was one of the negative cash flow BDCs found in our analysis. In the LTM period, BlackRock TCP generated negative $30.3 million of cash flow after dividends. Cash flow in our analysis excludes net financing activities.

Therefore, if BlackRock TCP changes status on a number of these investments to nonaccrual, while it won’t improve the fund’s cash flow position, it wouldn’t make it materially worse. A bigger risk could be BlackRock TCP’s cost of debt financing if yields remain elevated or continue to rise. Due to the high level of PIK interest, discussed above, BlackRock TCP’s cash income yield was 9.2% LTM as of Sept. 30, materially lower than the company’s reported income yield of 11.4%. Of the company’s $1.1 billion of total debt as of Sept. 30, 2025, $325 million of notes mature Feb. 9 this year. The company’s capital structure as of Sept. 30 is HERE.

Another concerning result of the BlackRock TCP announcement is that, as mentioned above, many of the loans written down were marked near par, or at the very least, not marked at distressed levels.

An analysis of BlackRock TCP’s portfolio as of Sept. 30 reveals that outside of loans on nonaccrual status, the book, using fair value pricing as a proxy, was relatively healthy. Outside of the 10% of principal of loans in nonaccrual status, only 4.4% of loans, representing just 2.2% of principal, was marked below 90% of par as of Sept. 30. However, as a sign of potential weakness in the underlying credits, more than 20% of performing loans have some level of PIK component, possibly indicating an inability of borrowers to be able to fully pay interest in cash.