Investment management giant BlackRock announced Thursday it has reduced the valuation of its private credit fund, BlackRock TCP Capital Corp, during the first quarter of the year.
The fund’s net asset value per share declined approximately 5% to reach $6.72 during the quarter, based on fair value calculations disclosed in earnings reports.
The development comes as investors scrutinize private credit fund portfolios more closely, particularly business development companies, amid concerns that artificial intelligence advances could disrupt software sector business models.
However, the fund showed improvement in one key metric – its non-accrual rate, representing the portion of its portfolio significantly behind on interest payments, improved to 2.8% at fair value from the previous quarter’s 4%.
Financial filings reveal the fund experienced $32.7 million in net realized losses during the first quarter. Additionally, it reported $2 million in net unrealized losses, which the company linked to loan losses involving struggling software company Pluralsight and other firms.
According to the fund, six portfolio companies were responsible for approximately two-thirds of the net asset value decline, with roughly 91% of the reduction stemming from investments made in 2021 or before.
“Certain of these businesses benefited from high levels of pandemic-era demand but have since seen results soften,” the fund stated.
“In addition, because these investments were originated in a low base-rate environment, several have struggled to adapt to a period of sustained higher interest rate.”
As part of its previously approved Company Repurchase Plan, BlackRock TCP has purchased more than 156,000 shares since April 1, spending a total of $600,000.
The first quarter performance follows a challenging fourth quarter, when company-specific issues led to a 19% net asset value drop, with six portfolio companies again accounting for two-thirds of that decline.
