BlackRock TCP Capital Corp reduced the fair-value assessment of its portfolio in the first quarter, resulting in an approximate 5% decline in net asset value (NAV) per share to $6.72, the company disclosed.
The fund recorded $32.7 million in net realized losses during the quarter and reported $2 million in net unrealized losses. Those unrealized losses included markdowns on loans to troubled software firm Pluralsight along with other portfolio companies.
Concentration among a small number of investments accounted for most of the NAV movement. Six portfolio companies were responsible for roughly two-thirds of the NAV decline, the fund said. In addition, about 91% of the reduction in NAV was tied to investments underwritten in 2021 or earlier.
BlackRock TCP noted that certain businesses in its portfolio saw elevated demand during the pandemic but have since experienced softer results. The fund also highlighted that several loans originated in a low base-rate environment have had difficulty adjusting amid a period of sustained higher interest rates.
The fund’s non-accrual rate - the share of its portfolio materially behind on interest payments - fell to 2.8% at fair value in the first quarter from 4% in the prior quarter.
Separately, BlackRock TCP has been purchasing shares under its previously approved Company Repurchase Plan. Since April 1, the fund bought back more than 156,000 shares for a total cost of $600,000.
The company also recorded substantial issuer-specific NAV pressure in the prior quarter. In the fourth quarter, issuer-specific developments drove a 19% decline in NAV, with the same pattern of a small group of portfolio companies accounting for a large portion of the drop.
Context and mechanics
The fund’s disclosures attribute a significant portion of the recent NAV deterioration to holdings that benefitted from high pandemic-era demand and to deals struck when interest rates were much lower. As those circumstances evolved, several portfolio companies struggled to maintain earlier performance levels, contributing to realized and unrealized losses on the fund’s books.
Capital activity
Management has sought to use the repurchase plan to buy back stock at prevailing levels, accounting for more than 156,000 shares repurchased at a cost of $600,000 since April 1.
Performance metrics reported
- NAV per share at fair value: $6.72, down roughly 5% in the quarter
- Net realized losses: $32.7 million
- Net unrealized losses: $2 million
- Non-accrual rate at fair value: 2.8% (from 4% prior quarter)
- Share repurchases since April 1: more than 156,000 shares at $600,000 total cost