Fitch Ratings has lowered BlackRock TCP Capital Corp.'s long-term issuer default rating and associated debt ratings to 'BB' from 'BB+' and has put the ratings on Rating Watch Negative. The agency said the move reflects expectations that the company's net asset value (NAV) will decline by 19%, a drop that Fitch says will substantially erode the firm's asset coverage cushion.
Fitch forecast that leverage will grow as a result of the NAV decline. The ratings agency expects overall leverage to reach 1.74x by year-end 2025, with net regulatory leverage rising to 1.45x. Both figures exceed the company's stated internal target range of 0.9x to 1.20x, and Fitch noted it will likely take multiple quarters for BlackRock TCP Capital to return to that range.
Asset quality is another area of concern flagged by Fitch. Non-accrual investments are expected to rise to 4.0% of the debt portfolio at fair value and to 9.6% at cost by the end of 2025. Separately, Fitch highlighted that net realized losses were 12.1% of the average portfolio at fair value for the first nine months of 2025, a level it described as materially higher than the average across business development company peers.
Dividend coverage is expected to come under pressure in 2026. Fitch cited a combination of tighter spreads, the prospect of rate cuts, and the scheduled expiration of a partial base management fee waiver after the fourth quarter of 2025. Management guidance for net investment income places expected fourth-quarter 2025 NII between $0.24 and $0.26 per share, against a quarterly dividend of $0.25.
Liquidity and refinancing needs are also central to Fitch's concerns. The company faces $325 million of unsecured notes maturing in February 2026 that it plans to refinance using revolving facilities. Fitch said that relying on revolving facilities to address the upcoming maturity is likely to weaken BlackRock TCP Capital's liquidity profile and could constrain earnings capacity.
The ratings agency warned that failure to reduce leverage, restore asset coverage, or improve dividend coverage could prompt further negative rating action. Fitch also described the sector outlook for business development companies as deteriorating for 2026, reflecting elevated interest rates and a challenging macroeconomic backdrop.
In sum, Fitch's downgrade and watch placement reflect a combination of an expected material NAV decline, rising leverage above internal targets, worsening asset quality metrics, potential stress on dividend coverage, and near-term refinancing risks tied to a significant unsecured note maturity.