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On Friday, Keefe, Bruyette & Woods made a downward adjustment to the price target for TCP Capital (NASDAQ:TCPC) stock, setting it at $8.50, down from the previous $9.00, while keeping a Market Perform rating on the company. The decision comes in the wake of a challenging quarter for TCP Capital, marked by significant credit issues and a decline in net asset value (NAV).
The investment firm’s analyst reported that the company’s book value (BV) saw a decrease of 8.8%, which was primarily due to credit write-downs. A substantial portion of the NAV decline, over 70%, was attributed to issues related to Razor, a holding within TCP Capital’s portfolio. The rate of non-accruing investments rose sharply to 14.4% at cost, up from 9.3%, with a noted reduction in watchlist investments primarily because of movements to non-accrual status. Despite these challenges, InvestingPro data shows the company maintains strong liquidity with a current ratio of 5.99, indicating sufficient assets to cover short-term obligations.
Despite these setbacks, TCP Capital’s net investment income (NII) slightly exceeded expectations. However, this was partly due to a temporary boost of $0.07, as no incentive fee was paid in the quarter. The analyst highlighted that the company’s adviser had consented to waive one-third of the base management fee for three consecutive quarters, spanning the first to the third quarter of 2025.
Further reflecting the financial strain, TCP Capital has reduced its base dividend by 26% to $0.25 per quarter. Additionally, the company plans to distribute a $0.04 special dividend in the first quarter of 2025, followed by $0.02 special dividends in both the second and third quarters of the year. The revised price target of $8.50 reflects the analyst’s assessment of the company’s financial health and future prospects following the recent difficulties.
In other recent news, BlackRock TCP Capital Corp reported its Q4 2024 earnings, which showed an earnings per share (EPS) of $0.36, missing the forecast of $0.37. Revenue also fell short, coming in at $61.25 million compared to the expected $66.73 million. The company announced a reduction in its regular dividend to $0.25 per share, reflecting adjustments to a challenging interest rate environment. BlackRock TCP Capital Corp’s net asset value per share decreased to $9.23 from $10.11, indicating broader market pressures and portfolio markdowns. In response to these developments, the company plans to declare special dividends of at least $0.02 in the second and third quarters of 2025. Analysts have expressed concerns about the impacts of the HPS acquisition by BlackRock (NYSE:BLK), though management remains focused on maintaining an investment-grade rating. The company highlighted its emphasis on middle market lending and first lien loans, leveraging the BlackRock platform’s resources to navigate economic challenges. Additionally, BlackRock TCP Capital Corp’s management fee will be waived by one-third for three quarters in 2025, as part of efforts to support shareholders amidst financial pressures.
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