Blackrock Tcp Capital NASDAQ: TCPC said its second-quarter results and a newly completed portfolio sale transaction have materially reduced leverage, expanded liquidity and prompted the board to begin a strategic review of alternatives intended to build long-term shareholder value.
The company transferred approximately $523 million of investments spanning 78 portfolio companies into a continuation vehicle sponsored by Pantheon. The assets represented roughly 48% of the fair value of TCPC’s pre-transaction debt portfolio and included all collateral underlying the recently issued BlackRock DLF 2026-C CLO LLC, along with additional investments.
TCPC retained a direct interest in substantially all affected portfolio companies, transferring an average of about two-thirds of each investment position. It also retained a 5% equity interest in the continuation vehicle. TCPC’s investment adviser will serve as adviser to the vehicle without compensation, while the vehicle assumed all CLO liabilities.
Transaction reduces leverage and commitments
The transaction was priced at 95% of the gross fair value of assets sold as of Dec. 31, 2025, subject to customary adjustments. Chief Executive Officer and Co-Chief Investment Officer Phil Tseng said the transaction is expected to reduce net asset value by about 10.4%, or $0.68 per share, based on June 30 NAV. Chief Financial Officer Erik Cuellar said the estimated NAV impact includes transaction-related expenses.
The board received a third-party fairness opinion from Lincoln International in connection with the sale.
Approximately $152 million in proceeds were primarily used to pay down debt. Along with CLO deconsolidation and post-quarter-end repayments, TCPC estimated its pro forma net leverage fell to roughly 0.4 times, from 1.38 times at June 30. The company said leverage would fall below 0.3 times after expected additional paydowns tied to announced transactions, including the anticipated repayment of its Domo investment.
Unfunded commitments, which stood at $90 million at quarter-end, were reduced to approximately $36 million on a pro forma basis. Jason Mehring, TCPC’s president, said the company had about $395 million of liquidity following the sale and recent repayments.
“This transaction materially lowers leverage, reduces investment position sizes, and significantly enhances our investment capacity,” Tseng said.
Board begins strategic review
TCPC’s board retained Keefe, Bruyette & Woods to assist with a strategic review. The review will consider potential actions including reinvesting the portfolio, returning capital to shareholders, pursuing strategic combinations or other corporate transactions, or a combination of those options.
Tseng said there is no specific timetable for the process and that management would continue to be prudent with capital allocation while the review is underway. He said the company has not entered the review with a predetermined outcome.
“We don’t have any comment on what we think will come out of the strategic evaluation process,” Tseng said in response to an analyst question. “We’re not going into it with a specific agenda except for generating long-term shareholder value.”
Second-quarter portfolio activity
At June 30, TCPC’s portfolio had a fair value of $1.29 billion across 134 portfolio companies in 35 industry sectors. Senior secured loans represented 91.5% of the portfolio, and all of those loans carried floating rates. First-lien investments accounted for 89.8% of fair value.
The company deployed $25 million during the quarter, primarily to previously committed investments, and added one new borrower. Meanwhile, payoff and paydown activity totaled $111.6 million, resulting in net repayments of $86.6 million.
Repayments included $22 million from Thrasio, $14.9 million from StarRez and $13.1 million from AutoAlert, in addition to $48.7 million from five other companies. TCPC removed its remaining $3.7 million Thrasio position from non-accrual status, saying it expects the investment to be paid down in full.
After quarter-end, the company received another $97.4 million in repayments, including $55.2 million from Motive Technologies, formerly KeepTruckin, and $39 million from Pico Quantitative Trading. Domo also announced an agreement to sell substantially all of its operating businesses to Progress Software. TCPC expects the transaction to result in full repayment of its $69 million debt investment in Domo when the sale closes in the fourth quarter.
Non-accruals declined to 1.6% of the portfolio at fair value and 7.4% at cost, compared with 2.8% and 7.6%, respectively, at the end of the first quarter. The weighted average effective yield on the portfolio was 10.5% at quarter-end.
Financial results and dividend
TCPC reported total investment income of $40 million, or $0.48 per share, for the second quarter. Net investment income was $18.1 million, or $0.22 per share, while adjusted net investment income was $17.5 million, or $0.21 per share.
The company recorded net realized losses of $14.8 million, or $0.18 per share, primarily due to a $10 million loss on the exit of AutoAlert. Net unrealized gains were $1.3 million, as reversals of prior unrealized losses related to AutoAlert and Thrasio were partially offset by markdowns in Pluralsight, PVHC and Zilliant.
NAV declined $0.14 per share during the quarter to $6.58, a decrease of approximately 2.1%. Tseng attributed the decline primarily to developments involving Pluralsight, PVHC and Zilliant, as well as realized losses on the AutoAlert and Become exits.
The board declared a third-quarter dividend of $0.17 per share, payable Sept. 30 to shareholders of record as of Sept. 16. During the second quarter, TCPC repurchased 156,370 shares at a weighted average price of $3.78 per share.
About Blackrock Tcp Capital (NASDAQ:TCPC)
BlackRock TCP Capital Corp is a publicly traded business development company (BDC) listed on the NASDAQ under the ticker TCPC. Externally managed by BlackRock, the firm provides customized financing solutions to U.S. middle-market companies, with a focus on sponsor-backed transactions. Its core strategy centers on delivering current income and capital appreciation through a diversified portfolio of debt and equity investments across a variety of sectors, including consumer products, healthcare, business services and industrials.
Since its initial public offering in 2013, BlackRock TCP Capital has partnered with private equity sponsors to underwrite and structure senior secured first-lien loans, second-lien loans, mezzanine debt and select equity co-investments.
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