DOJ Investigates BlackRock TCP Capital Valuations, Threatening to Open Pandora's Box for Private Credit Marks
The U.S. Attorney for the Southern District of New York (SDNY) has launched an investigation into the valuation and pricing practices at BlackRock TCP Capital Corp (TCPC), an exchange-traded business development company (BDC). The federal criminal probe was triggered by a sudden, massive 19% write-down of TCPC's net asset value (NAV) per share in January 2026. This investigation highlights the growing regulatory scrutiny of "Level 3" assets in private credit, which rely heavily on unobservable, manager-determined inputs rather than market prices.
The Trigger: A Sudden 19% NAV Write-Down
In January 2026, BlackRock TCP Capital Corp shocked the market by slashing its NAV per share by 19% for the fourth quarter of 2025. This sudden decline added significant fuel to investor anxiety regarding the health of private credit portfolios.
According to Morningstar's analysis:
"The attention from prosecutors on TCPC appears linked to a nasty stumble that came up in January. At that time, the fund reported it would be slashing the net asset value of its shares by 19% for the fourth quarter of 2025, which added fuel to a fire of worry about the overall health of private credit markets."
BlackRock attributed two-thirds of the write-down to six problematic portfolio companies. These included credit stress at e-commerce aggregator Razor and equity exposure at education-technology provider Edmentum (which made up 1.9% of the portfolio). Overall, TCPC held a 9.9% equity exposure (warrants, preferred, and common stock) at the end of Q3 2025, which amplified its losses.
The Role of Financial Leverage
A critical driver of the magnitude of TCPC's write-down was its high financial leverage. As of September 2025, TCPC held nearly $1 billion in borrowed debt alongside $740 million in net assets, amplifying its market exposure to over 230% of its net assets. Without this leverage, the NAV write-down would have been an estimated 8% rather than 19%.
Industry-Wide Implications
Because Level 3 assets are manually priced and infrequently adjusted, the DOJ investigation could establish a dangerous precedent for alternative asset managers who utilize significant discretion in marking their books.
As Morningstar notes:
"The real problem could be that there’s nothing unique about the BlackRock situation. Nearly all of its competitors use some financial leverage. Its own investment choices may have been poor, but infrequent, manual assignment of prices that don’t move that much is also an industrywide phenomenon."
If federal prosecutors pursue criminal charges over how private credit portfolios are marked, it could force a rapid, painful reassessment of valuations across the entire $2 trillion industry, opening a "Pandora's box" of regulatory liabilities.