BlackRock TCP Capital (TCPC) risk factors, 2025 10-K

Risks related to our business

1. 01Market disruptions and other geopolitical or macroeconomic events could create market volatility that negatively impacts our business, financial condition and earnings
2. 02Economic recessions or downturns could impair our portfolio companies and harm our operating results
3. 03Inflationary pressures have been elevated in recent years, and there is a risk of the economy entering a recession
4. 04We are subject to risks related to inflation
5. 05From time to time, capital markets may experience periods of disruption and instability, which may be evidenced by a lack of liquidity in debt capital markets, write-offs in the financial services sector, re-pricing of credit risk and failure of certain major financial institutions
6. 06The U.S. and global capital markets are subject to systemic risk that could adversely affect our business, financial condition and results of operations
7. 07Price declines and illiquidity in the corporate debt markets have adversely affected, and may in the future adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation
8. 08Changes in legal, tax and regulatory regimes could negatively impact our business, financial condition and earnings
9. 09Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us
10. 10Uncertainty regarding the implementation of the EU and UK's Trade and Cooperation Agreement could negatively impact our business, financial condition and earnings
11. 11Changes in interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations
12. 12We are subject to risks associated with artificial intelligence and machine learning technology
13. 13We may not replicate the historical performance of other investment companies and funds with which our investment professionals have been affiliated
14. 14We are not managed by BlackRock, but rather one of its subsidiaries and may not replicate the success of that entity or BlackRock
15. 15Our business model depends upon the development and maintenance of strong referral relationships with other asset managers and investment banking firms
16. 16The Advisor’s liability is limited under the investment management agreement, and we are required to indemnify the Advisor against certain liabilities, which may lead the Advisor to act in a riskier manner on our behalf than it would when acting for its own account
17. 17We may suffer credit losses
18. 18Our use of borrowed funds, including under the Leverage Program, to make investments exposes us to risks typically associated with leverage
19. 19our ability to pay dividends on our common stock will be restricted if our asset coverage ratio is not at least 150% and any amounts used to service indebtedness would not be available for such dividends
20. 20maintenance of a minimum level of stockholders’ equity
21. 21The creditors under the Credit Facilities have a first claim on all of the Company’s assets included in the collateral for the respective facilities
22. 22Lenders under the Operating Facility may have a veto power over the Company’s investment policies
23. 23The SBIC may be unable to make distributions to us that will enable us to meet or maintain RIC status, which could result in the imposition of an entity-level tax
24. 24The SBIC is subject to SBA regulations, and any failure to comply with SBA regulations could have an adverse effect on our operations
25. 25we liquidate the SBIC or the SBA exercises its remedies under the SBA-guaranteed debentures issued by the SBIC upon an event of default
26. 26The SBA regulations currently limit the dollar amount of SBA-guaranteed debentures that can be issued by any one SBIC to $175.0 million or to a group of SBICs under common control to $350.0 million
27. 27The disposition of our investments may result in contingent liabilities
28. 28As a BDC regulated under the 1940 Act, we are generally required to maintain a certain asset coverage for senior securities representing indebtedness (i.e., debt) or stock (i.e., preferred stock)
29. 29We have indebtedness outstanding pursuant to the Leverage Program and expect, in the future, to borrow additional amounts under the Credit Facilities and may increase the size of the Credit Facilities or enter into other borrowing arrangements
30. 30Corresponding Return to Common Shareholders
31. 31The lack of liquidity in our investments may adversely affect our business
32. 32Our use of borrowed funds to make investments exposes us to risks typically associated with leverage
33. 33A portion of our distributions to shareholders may include a return of shareholder capital
34. 34We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income
35. 35To the extent OID and PIK interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income
36. 36OID and PIK instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. OID and PIK income may also create uncertainty about the source of our cash distributions
37. 37Any unrealized losses we experience on our investment portfolio may be an indication of future realized losses, which could reduce our income available for distribution
38. 38We may be unable to realize the benefits anticipated by the Merger, including estimated cost savings, or it may take longer than anticipated to achieve such benefits
39. 39Our Advisor and its affiliates and employees may have certain conflicts of interest
40. 40In addition, BlackRock personnel may serve on the boards of directors of companies in the same industries as companies in which the Company expects to invest, which can give rise to conflicting obligations and interests
41. 41relationship exists between any counsel and any shareholder solely by such shareholder making an investment in the Company. As a result, shareholders are urged to retain their own counsel
42. 42Our incentive compensation may induce our Advisor to make certain investments, including speculative investments
43. 43We may be obligated to pay the Advisor incentive compensation payments in excess of the amounts we would have paid if such compensation was subject to clawback arrangements
44. 44Our Advisor’s liability is limited under the investment management agreement, and we are required to indemnify our Advisor against certain liabilities, which may lead our Advisor to act in a riskier manner on our behalf than it would when acting for its own account
45. 45We are dependent upon senior management personnel of the Advisor for our future success; if the Advisor is unable to retain qualified personnel or if the Advisor loses any member of its senior management team, our ability to achieve our investment objective could be significantly harmed
46. 46The Advisor can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations
47. 47We may in the future determine to fund a portion of our investments by issuing preferred stock, which would magnify the potential gains or losses and the risks of investing in us in the same manner as our borrowings
48. 48We may experience fluctuations in our periodic operating results
49. 49If we fail to maintain our status as a BDC, our business and operating flexibility could be significantly reduced
50. 50Because we intend to distribute substantially all of our income to our shareholders to maintain our status as a RIC, under the Code we will continue to need additional capital to finance growth. If additional funds are unavailable or not available on favorable terms, our ability to grow will be impaired
51. 51The highly competitive market in which we operate may limit our investment opportunities
52. 52We do not seek to compete primarily based on the interest rates we offer, and we believe that some of our competitors make loans with interest rates that are comparable to or lower than the rates we offer
53. 53Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or shareholder approval, the effect of which may be adverse
54. 54BlackRock Acquisition of HPS

Risks related to our investments

1. 55We invest primarily in middle-market companies primarily through leveraged loans
2. 56they may have difficulty accessing the capital markets to meet future capital needs
3. 57if a negative perception of the lower grade debt market develops, the price and liquidity of lower grade securities may be depressed. This negative perception could last for a significant period of time
4. 58A trading market or market value of our debt securities may fluctuate
5. 59market rates of interest higher or lower than rates borne by the debt securities
6. 60We may expose ourselves to risks if we engage in hedging transactions
7. 61We are subject to credit risk related to investments in our portfolio companies and with our financial institutions and counterparties
8. 62Because our investments are generally not in publicly traded securities, there will be uncertainty regarding the value of our investments, which could adversely affect the determination of our net asset value
9. 63We and the Advisor may be a party to legal proceedings in connection with our investments in our portfolio companies
10. 64We may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments
11. 65Our portfolio companies may incur debt that ranks equally in right of payment with, or senior to, our investments in such companies
12. 66When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and other equity holders and management of the company may make decisions that could decrease the value of our portfolio holdings
13. 67There may be circumstances in which our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims
14. 68Our portfolio companies may be highly leveraged
15. 69Our portfolio companies may prepay loans, which prepayment may reduce stated yields in the future if capital returned cannot be invested in transactions with equal or greater expected yields
16. 70Concentration of our assets in an issuer, industry or sector may present more risks than if we were more broadly diversified over numerous issuers, industries and sectors of the economy
17. 71Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio
18. 72Our investments in the financial services sector are subject to various risks including volatility and extensive government regulation
19. 73The effect of global climate change may impact the operations of our portfolio companies
20. 74We may invest in “covenant-lite” loans, which could have limited investor protections, and expose us to different and increased risks

Risks related to our operations as a BDC

1. 75If we do not invest a sufficient portion of our assets in qualifying assets, we could be precluded from investing in certain assets or could be required to dispose of certain assets, which could have a material adverse effect on our business, financial condition and results of operations
2. 76We will be subject to corporate-level U.S. federal income tax on all of our income if we are unable to qualify as a RIC under the Code, which could have a material adverse effect on our financial performance
3. 77There is a risk that you may not receive distributions or that our distributions may not grow over time and a portion of our distributions may be a return of capital
4. 78We may experience cybersecurity incidents and are subject to cybersecurity risks
5. 79We are subject to the cybersecurity risks of our Service Providers, which could negatively impact the Company and its shareholders
6. 80The failure in cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively
7. 81computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised
8. 82We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends

Risks related to our common stock and other securities

1. 83Our shares of common stock have traded at a discount from net asset value and may do so again in the future, which could limit our ability to raise additional equity capital
2. 84Investing in our common stock may involve an above average degree of risk
3. 85The market price of our common stock may fluctuate significantly
4. 86Shareholders will likely incur dilution if we sell or otherwise issue shares of our common stock or securities to subscribe for or convertible into shares of our common stock at prices below the then current net asset value per share of our common stock
5. 87Our capital-raising activities may have an adverse effect on the market price of our common stock
6. 88We may choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive
7. 89If we issue preferred stock, the net asset value and market value of our common stock may become more volatile
8. 90We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock
9. 91Holders of any preferred stock we might issue would have the right to elect members of our Board of Directors and class voting rights on certain matters
10. 92Certain provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock
11. 93Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering we may conduct. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares
12. 94Terms relating to redemption may materially adversely affect your return on any debt securities that we may issue
13. 95Our credit ratings are subject to change and may not reflect all risks of an investment in our debt securities