BlackRock TCP shifts US$523m of loans to Pantheon as NAV takes 10% hit

BlackRock TCP Capital is moving US$523m of private loans into a Pantheon-backed continuation vehicle, offloading exposure representing almost half of the business development company’s debt portfolio as it moves to cut leverage.

The Nasdaq-listed lender, which provides debt to US middle-market companies, is transferring roughly two-thirds of almost 80 loan investments into the new structure. Pantheon will acquire a 95% interest while BlackRock TCP retains 5%.

The transaction is expected to generate approximately US$152m of gross proceeds for BlackRock TCP. It also includes around US$60m of unfunded commitments and collateral supporting a US$535.8m collateralised loan obligation.

The balance-sheet impact is substantial. BlackRock TCP expects leverage to fall from approximately 1.38 times to 0.4 times following the transaction and to around 0.3 times after an additional known repayment. The transfer is also expected to reduce net asset value by 10.4%, equivalent to US$0.68 per share.

Continuation vehicles allow an investment manager to transfer assets from an existing portfolio into a new fund rather than selling every position individually. Existing investors can gain liquidity while the manager, and new secondary investors, retain exposure to the underlying loans.

The structure has become increasingly important in private credit as managers seek liquidity for portfolios of loans that were originally expected to run off or refinance more quickly.

For BlackRock TCP, the transaction represents a particularly large reshaping of its portfolio. The BDC had already been confronting deteriorating asset values earlier this year. At the end of March, official company disclosures showed net regulatory leverage of 1.29 times and a net asset value of US$6.72 per share. BlackRock TCP focuses principally on originating and investing in debt issued by middle-market companies.

The deal also highlights the growing role of specialist secondaries investors in providing liquidity to private-credit lenders. Pantheon’s acquisition gives BlackRock TCP a way to reduce balance-sheet exposure without waiting for every underlying borrower to repay or refinance.

For the wider private-credit market, the size of the transfer is notable. When almost half of a listed lender’s debt book can be repositioned through a secondary structure, continuation vehicles are moving from a niche portfolio-management tool towards a meaningful source of liquidity and risk transfer.