What the BlackRock TCP Capital Write-Down Signals for Parts of Private Credit
Summary: A recent 19% NAV decline at BlackRock TCP Capital underscores how concentrated exposures, equity-heavy restructurings, and high leverage can magnify losses in parts of private credit. It’s a reminder that outcomes across the asset class vary widely, and that conservative underwriting, modest leverage, first-lien security, and true diversification remain essential.
In the third week of January 2026, BlackRock TCP Capital, a publicly listed business development company (BDC), reported a 19% decline in net asset value in a single quarter. As recently as September 2025, the vehicle held approximately $1.8 billion in assets, making the announcement highly notable not only for its size but also for what it signals about segments of the private credit landscape.
The markdown stemmed from the restructuring and poor performance of several underlying investments, prompting broader industry questions about underwriting discipline, leverage, valuation practices, and portfolio construction. While this event is specific to one manager, it reflects dynamics that have been building across much of the BDC universe.
Where the Stress Came From
Roughly two-thirds of the NAV decline was tied to write-downs in six companies—Edmentum, Razor, SellerX, HomeRenew/Renovo, Hylan, and InMobi. Non-performing loans had already climbed meaningfully, moving from 4% to 14% of the portfolio in 2024. Many of the challenged credits were in sectors, such as e-commerce aggregators, that experienced rapid deterioration.
A meaningful portion of the BDC’s portfolio also included second-lien loans (6.7%) and equity exposures (10.3%). These positions became increasingly volatile through restructurings, during which debt was often exchanged for equity, introducing additional risk that can be masked until market conditions shift.
By late 2025, leverage metrics had also moved beyond target levels:
- Debt-to-equity at 1.74x.
- Net regulatory leverage at 1.45x.
- Net realized losses of 12.1% for the first nine months of 2025.
Taken together, these figures reflected a portfolio under strain, magnifying the eventual valuation impact.
A Broader Industry Conversation
The BlackRock TCP Capital situation aligns with several ongoing themes that investors have been tracking across parts of private credit:
- Rising non-accruals.
- Pressure from higher interest rates.
- Structural weaknesses in certain segments.
- Increased scrutiny on asset quality and valuation assumptions.
Importantly, it does not imply uniform weakness across private credit. The asset class is diverse, and outcomes vary widely depending on underwriting approach, leverage, security structure, and day-to-day portfolio management.
Why Garrington’s Corner of the Market Looks Different
The lower-mid-market lending space in which Garrington operates differs materially from the ecosystem of large, global BDCs.
1.Selective Deployment
We face little pressure to compromise underwriting standards. Capital is deployed only where risk and return are appropriate.
2. Moderate Leverage
The Fund typically targets a 0.5x debt-to-equity ratio, well below levels seen in some BDC structures.
3. First-Lien Security
Approximately 99% of loans hold first-lien security over tangible assets, with minimal exposure to second-lien or equity positions.
4. Diversification Across ~100-150 Loans
The portfolio spans asset-based lending, SME finance, factoring, and specialty finance, limiting borrower concentration risk.
5. Realized Cash Interest
Very low PIK exposure ensures that cash flows drives returns and that loan balances do not increase above their collateral value
6. Independent Oversight and Valuation Discipline
Consistent stress testing and portfolio monitoring have contributed to a long-term impairment rate which averages below 0.65% per year.
Conclusion: Clarity Amid the Noise
The 19% NAV decline at BlackRock TCP Capital is a meaningful reminder of how equity exposure, higher leverage, and concentrated underwriting can interact in certain corners of private credit. It also reinforces why the asset class cannot be evaluated as a monolith.
In environments where select managers face stress, disciplined approaches, first-lien security, tangible collateral, conservative leverage, and active ongoing oversight remain essential to capital preservation. Garrington will continue to emphasize these foundational elements as we navigate the evolving private credit landscape.
