BlackRock's Private Credit CEO Is Out. Here's What the TCP Capital Mess Tells Accredited Investors

TL;DR: Phil Tseng, the CEO of BlackRock TCP Capital Corp. (NASDAQ: TCPC), is leaving the firm after the $1.9 billion business development company cut its net asset value 19% in January and another 5% in May, while federal prosecutors in the Southern District of New York question BlackRock executives about how the fund values its loans.

According to citybiz, Tseng's departure has not been formally dated and BlackRock has not named a successor, but the timing tells you everything. He's leaving in the middle of a U.S. Attorney's Office investigation into how his fund priced its own loans. That's not a routine executive transition. That's a company managing its exposure while regulators are still asking questions.

Tseng isn't some junior hire. He built his career at Tennenbaum Capital Partners, the private credit shop BlackRock bought in 2018, and he holds an MBA from Harvard Business School. He ran BlackRock's U.S. core middle-market direct lending strategy inside the firm's Private Financing Solutions unit, the group formed after BlackRock's roughly $12 billion acquisition of HPS Investment Partners last year. TCP Capital came along with that deal. If BlackRock's flagship push into direct lending, meaning loans made straight to companies instead of through a bank or a bond sale, has a face, Tseng has been it.

The Mechanics: What Actually Happened at TCP Capital

BlackRock TCP Capital is a publicly traded BDC, a business development company. In plain English, a BDC is a fund, often listed on a stock exchange like a regular company, that pools investor money and lends it directly to mid-sized businesses that are too small or too risky for a traditional bank loan. TCPC trades under the ticker TCPC and makes secured loans to middle-market borrowers, the same layer of the economy that has become the private credit industry's biggest growth story and, increasingly, its biggest headache.

The trouble surfaced in January 2026, when TCP Capital marked down its net asset value, or NAV (the per-share value of the fund's underlying loans), by an estimated 19%. According to Benzinga, that cut traced largely to portfolio restructurings tied to e-commerce holdings and the bankruptcy of Renovo Home Partners, a home-services roll-up. The stock dropped more than 14% on the news. Then, in May, BlackRock cut TCPC's value again, this time by roughly 5%, even as the company insisted credit quality across the rest of the book was improving. Total markdowns in the first quarter alone came to $35 million.

Somewhere in between those two write-downs, the Manhattan U.S. Attorney's Office started asking questions. Federal prosecutors questioned BlackRock executives about how TCP Capital values its loans, according to multiple reports including Capital Brief, which cited Bloomberg's original reporting. Valuation is the single hardest problem in private credit because these loans don't trade on an exchange. There's no ticker tape telling you what a loan to a mid-sized software company is worth this afternoon. The fund's own managers estimate the value every quarter, and outside investors are largely stuck trusting the number.

Why This Matters Right Now

I've watched enough fund blowups to know that a CEO departure during an active federal probe is a tell, not a coincidence. Companies don't usually let their most senior investment person walk out the door mid-investigation unless the board has already concluded the relationship, or the person's continued presence, is a liability. BlackRock hasn't said that publicly. It doesn't need to. The sequence speaks for itself: markdown, markdown, federal questioning, resignation.

Zoom out and TCP Capital is a symptom, not an isolated case. The private credit market, sized at roughly $1.8 trillion to $2.1 trillion depending on whose estimate you use, has spent the first half of 2026 absorbing a wave of stress that started with software borrowers and has spread into fund-level liquidity fights. According to Within Intelligence, Thoma Bravo just handed the enterprise software company Medallia over to a consortium of lenders led by Blackstone, wiping out roughly $5 billion of Thoma Bravo's original equity investment in what several outlets are calling one of the largest private equity restructurings ever. Medallia's debt sits across nine different BDCs, with Blackstone's own flagship fund holding more than $1.1 billion of it at par value. The loan's market marks have fallen to an average of 61.2 cents on the dollar.

At the same time, non-traded BDCs run by Apollo, Ares, and Morgan Stanley have all been gated this quarter, meaning they capped investor withdrawal requests at the standard 5% quarterly limit even though actual redemption requests ran from 11.6% to nearly 17% of shares outstanding. A Reuters analysis covered by Global Banking & Finance found that 28 of 53 publicly traded BDCs were unprofitable in the first quarter of 2026, up from just 12 a year earlier, with average profits swinging from positive $26 million to negative $7.6 million. That's the visible, regulated slice of private credit. The unlisted portion is bigger and harder to see.

None of this means private credit is collapsing. Fitch Ratings put the 2025 default rate for U.S. corporate borrowers in its private credit universe at 9.2%, up from 8.1% in 2024, but that universe skews toward smaller, weaker issuers with $25 million or less in earnings, according to an analysis published by Ankura. Big pension allocators like the Arizona Public Safety Personnel Retirement System, which runs roughly 17% of its book in private credit and is targeting 20%, haven't budged. What's changed is that the retail and semi-liquid end of the market, the funds that promised quarterly liquidity to individual accredited investors, is discovering the gap between promised liquidity and actual liquidity the hard way.

The Contrarian Angle: What the Press Releases Don't Say

Here's what none of the official statements will tell you directly. A federal valuation investigation doesn't necessarily mean fraud. It could mean prosecutors are simply establishing a baseline understanding of how BDC managers price illiquid assets, something the SEC has flagged as a priority sector-wide. SEC Chairman Paul Atkins said in May that the agency is investigating allegations of misconduct in private credit firms generally, and enforcement director David Woodcock said regulators are attuned to potential risks relating to liquidity, fees, valuations, and conflicts of interest across the industry, according to InvestmentNews. TCP Capital may be one target among several in a much broader federal inquiry, not a uniquely bad actor.

But this could go wrong for investors in a specific way: fee structures. BDC managers earn base management fees on assets under management and incentive fees on income generated, and in several of these funds that fee math doesn't distinguish between cash interest and payment-in-kind (PIK) interest, where a borrower pays its interest bill with more debt instead of cash. A borrower drowning in debt can still generate reported income on paper through PIK accrual, and the manager still collects a fee on it, right up until the loan gets marked down or defaults outright. That's effectively what happened with Medallia's loan before its restructuring: the interest burden ballooned through PIK usage until lenders finally demanded 100% cash payments, at which point Medallia's interest expense exceeded its annual earnings and the whole capital structure had to be redone.

If you own shares in TCPC or any BDC with meaningful PIK exposure, ask your advisor for the percentage of portfolio income that's coming from PIK versus cash. If that number has crept up over the past four to six quarters, you're looking at a fund that may be reporting income growth that isn't actually cash in the door. It's the accounting equivalent of a homeowner refinancing a mortgage every year just to make the current payment.

What Accredited Investors Should Watch For

If you hold, or are considering, an allocation to a BDC or a non-traded private credit fund, the TCP Capital situation is a useful checklist, not just a headline.

• Ask for the PIK-to-cash income ratio. Most BDCs disclose this in their 10-Q filings on SEC EDGAR. A rising PIK share, especially above 10% to 15% of total investment income, deserves a direct question to the manager.
• Check the redemption history, not just the current quarter. A fund gated once might be a blip. A fund gated for two or three consecutive quarters, like Morgan Stanley's North Haven Private Income Fund, tells you something structural about its liquidity mismatch.
• Look at concentration by sector, specifically software and technology. Public BDCs carry roughly 20.8% of their portfolios in software and technology exposure on average, per JPMorgan's February 2026 analysis. Ask what percentage of your fund's book sits there and how those loans are performing on a cash-pay basis.
• Read the fee lookback provisions. Some funds use a three-year lookback that reduces incentive fees after markdowns. Others don't. Know which kind you own.
• Watch for leadership changes during open investigations. An executive departure mid-probe, as with Tseng, is a signal worth a phone call to your advisor, not something to wave off as routine.
• Distinguish redemption pressure from default risk. They are related but not the same thing. A fund can face heavy withdrawal requests without a corresponding spike in actual borrower defaults, and vice versa.

If you're building out a broader framework for screening funds before you commit capital, our due diligence checklist for private credit funds walks through the specific documents and questions to request from a general partner before signing a subscription agreement, including how to interrogate a fund's valuation policy and its non-accrual loan history.

It's also worth understanding the regulatory backdrop. The SEC's broader private credit fraud inquiry, which we covered in detail in our piece on SEC Chairman Atkins' fraud investigation, is running in parallel with the SDNY's TCP Capital questions. These aren't necessarily the same investigation, but they reflect the same underlying concern: that valuation practices across the private credit market haven't kept pace with how large and how retail-accessible the asset class has become.

Frequently Asked Questions

Q: Is BlackRock TCP Capital in default or bankruptcy?

No. TCP Capital itself is not in default. It's a lending fund that has marked down the value of certain loans in its portfolio, including exposure tied to the bankruptcy of one of its borrowers, Renovo Home Partners. The fund's own shares continue to trade on Nasdaq under the ticker TCPC. A markdown on a loan asset is different from the fund itself defaulting on its own obligations.

Q: What is a BDC and how is it different from a typical private credit fund?

A business development company is a specific legal structure created under the Investment Company Act of 1940 that allows a fund to make loans to smaller and mid-sized companies while offering shares to a broader base of investors, including through public stock exchanges. Publicly traded BDCs like TCPC file quarterly reports with the SEC and disclose their holdings, which makes them more transparent than most private, non-traded credit vehicles. For a fuller explanation of how these vehicles work, see our guide to business development companies and private credit.

Q: Why does a federal investigation into valuation practices matter to individual investors?

Because the price you see for your shares in a private credit fund is only as good as the manager's own estimate of what the underlying loans are worth. Unlike a stock or a bond that trades constantly, most private credit loans don't have an independent market price. If a manager marks a loan too high for too long, investors can be redeeming shares, or buying new ones, at a price that doesn't reflect the loan's real risk. A federal probe into those practices, even if it doesn't result in charges, puts pressure on every manager in the industry to tighten up how they document and support their valuations.

Q: How does rising loan losses at BDCs connect to Federal Reserve interest rate policy?

Most private credit loans carry floating interest rates, meaning the rate a borrower pays moves with a benchmark rate rather than staying fixed. When the Fed holds rates higher for longer, borrowers with thinner cash flow cushions face rising debt-service costs, which is part of what pushed companies like Medallia into PIK arrangements and eventual restructuring. For more on how current Fed policy is shaping private credit spreads and allocation decisions for the second half of 2026, read our analysis of the Fed's latest rate hold and what it means for private credit allocations.

Q: Should I sell my private credit fund holdings because of this news?

That depends entirely on the specific fund, its sector concentration, its redemption history, and your own liquidity needs, not on one company's headline. TCP Capital's issues are real, but they're concentrated in specific troubled positions rather than evidence that every direct lending fund is broken. If you're holding leveraged loan or private credit exposure through a fund you haven't reviewed in the past two quarters, now is a reasonable time to pull the latest 10-Q and check the PIK income ratio and non-accrual loan percentage before making any decision. Reading the loan-level footnotes in a fund’s 10-Q, not just the headline NAV figure, is where most of the useful information actually lives.

Author Disclosure: Jeff Barnes, MBA has no personal position in any company, fund, or platform named in this article. Angel Investors Network has no current commercial relationship with any party mentioned. AIN provides marketing and education services, not investment advice. Past performance does not guarantee future results. All investments involve risk, including loss of principal.