BlackRock TCP Capital Q2 FY26 earnings call TCPC

TCPC transferred approximately $523 million of investments across 78 portfolio companies into a continuation vehicle sponsored by Pantheon. These assets comprised about 48% of the pre-transaction debt portfolio. TCPC retained a 5% equity interest in the vehicle, and its investment adviser will manage it without compensation. The transaction was priced at 95% of the December 31, 2025, gross fair market value, subject to customary adjustments, resulting in an estimated NAV decline of 10.4% or $0.68 per share based on June 30 NAV.

The approximately $152 million in proceeds from the transaction were primarily used to reduce debt. Together with the deconsolidation of the CLO and post-quarter end repayments, this led to a pro forma net leverage reduction to approximately 0.4x and unfunded commitments below $40 million. This significantly improves TCPC's financial flexibility and creates substantial new investment capacity, meaningfully accelerating the company's ability to reposition its portfolio.

The Board has engaged KBW to assist with a strategic review to evaluate options for utilizing the company's newfound flexibility to create long-term shareholder value. This review will consider a range of options, including reinvesting the portfolio, returning capital to shareholders, pursuing strategic combinations or other corporate transactions, or some combination of these options. Management emphasized there is no specific timetable for the review and no preconceived agenda, focusing solely on generating long-term shareholder value.

Apart from the transaction, TCPC continued to make progress against its strategic priorities during the second quarter, including reducing non-accruals, strengthening the balance sheet, and advancing portfolio repositioning efforts. NAV declined 2.1% to $6.58 per share, primarily reflecting developments at Pluralsight, PVHC, and Celion, as well as realized losses on exits. Non-accruals improved to 1.6% of the portfolio at fair value (7.4% at cost) from 2.8% (7.6%) at the end of the first quarter, driven in large part by positive developments at Thrasio.

Repayment activity was strong in the second quarter, totaling $111.6 million in payoffs and paydowns and resulting in net repayments of $86.6 million. This included $22 million from Thrasio (removed from non-accrual status), $14.9 million from Starz, $13.1 million from AutoAlert, and an additional $48.7 million across five other companies. Subsequent to quarter end, an additional $97.4 million in repayments was received, including $55.2 million from Motive Technologies and $39 million from Pico Quantitative Trading. The expected repayment of a $69 million debt investment from Domo in Q4 FY26 will further contribute to this trend.

At quarter-end, the portfolio had a fair market value of $1.29 billion invested across 134 portfolio companies in 35 industry sectors, with an average position size of $9.6 million. 91.5% of the portfolio was invested in senior secured loans (all floating rate), with 89.8% in first lien loans. Software represented 29.7% of the portfolio at fair value, decreasing modestly from 30.5% in Q1. Pro forma for the transaction and post-quarter end repayments, the portfolio has a fair market value of $671 million across 132 companies, with software exposure potentially reducing to 17% with the expected Domo repayment.

During the quarter, TCPC completed two important liability management initiatives. In May, the company issued $406 million of CLO debt, using the proceeds to fully repay its TCPC Funding II and merger facilities, thereby terming out a significant portion of secured debt. Additionally, TCPC repaid the remaining $107 million outstanding on its SBIC debt and subsequently surrendered its license, concluding there was limited benefit to maintaining the structure given the SBIC's cash position and fully drawn facility. These actions simplify the balance sheet and enhance financing flexibility.