BlackRock Intervenes to Fix TCP Capital and Curb Losses

Twelve months after BlackRock Inc. pursued a bold acquisition to remake its credit arm, the biggest money manager in the world has finally begun addressing the troubles in its existing private credit fund.

Investors reacted positively, sending the shares sharply higher. The move was the largest intraday jump since 2024, and the stock looked set to post its strongest closing gain since 2020. Still, it is down almost 30% this year.

Why TCP Capital Needed a Fix

TCPC, a listed private credit fund, described the Pantheon transaction as a way to reset the fund after steep write-downs on bad loans and US regulatory scrutiny.

During an earnings call Thursday, TCPC Chairman Phil Tseng said leverage "really inhibited our ability to reposition the portfolio." He explained that because its leverage had stayed north of 1.4 times in recent quarters, the fund could not invest meaningfully in new opportunities or repurchase significant numbers of shares.

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That constraint explains why the fund is moving a large block of loans into a continuation vehicle instead of simply selling them: TCPC can shed leverage while keeping a 5% equity stake in the transferred assets. Pantheon's vehicle will take a 95% equity interest in those assets.

TCPC manages a sliver of BlackRock's $15.3 trillion in assets, but it has been a persistent problem for the asset-management giant. BlackRock has been pushing into private credit by acquiring HPS Investment Partners; in 2024 it agreed to buy HPS for about $12 billion after years of trailing the leading lenders in the $1.8 trillion market. The purchase was meant to make BlackRock a significant force in a fast-growing lending arena.

After that transaction, HPS executives have played a growing role in TCPC's daily operations. Bloomberg News reported last month that Tseng is preparing to leave the firm.

He also said Thursday that the fund had made "strong progress" in strengthening its finances and reshaping itself, efforts that led to the Pantheon deal.

What the Pantheon Deal Does

TCPC said Thursday that a continuation vehicle will hold 48% of its debt investments. The vehicle will own 95% of the equity in those assets, with TCPC retaining the remaining 5%. The assets total $523 million across 78 portfolio companies.

Following the transaction, TCPC's net asset value is expected to fall about 10.4%, or 68 cents a share.

The board also brought in Keefe, Bruyette & Woods to examine strategic alternatives, including asset sales and potential public or private combinations.

Private credit lenders have come under closer scrutiny this year because advances in artificial intelligence could disrupt their software-focused bets, a sector that accounts for a big share of portfolios.

TCPC has marked down its assets twice this year: in January the book value fell 19%, and in May it fell another 5%. Both the Manhattan US Attorney's office and the SEC have also probed how the fund sets its valuations.

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