BlackRock’s latest hit in private credit has become a stress test for an entire corner of global finance that usually prefers to operate out of sight. A sharp markdown at BlackRock TCP Capital and a separate 100% loss on a private loan have jolted investors who had treated this opaque asset class as a relatively smooth, high-yield ride. The question now is not just what went wrong in one portfolio, but what those losses reveal about how risk has been priced and disclosed across private credit.
As I see it, the BlackRock episode has crystallized three intertwined fears: that valuations have been too generous, that documentation and structures may not be as protective as advertised, and that a funding model built on confidence could unravel quickly once cracks appear. Those concerns are no longer theoretical, they are being priced into stocks, bonds, and even volatility gauges tied to broader markets.
Inside the BlackRock TCP Capital shock
The immediate spark was a steep markdown at BlackRock TCP Capital, a business development company that lends to middle market borrowers. The vehicle flagged a roughly 19% decline in the net asset value of its investments over the last quarter of 2025, a drop large enough to raise doubts about how those loans had been valued in earlier periods and to draw scrutiny to the underlying credits that drove the hit, according to a Quick Summary. The shock was magnified because BlackRock markets itself as a disciplined steward of risk, so a double digit hit in a single quarter landed as a signal that stress may be deeper than headline numbers had suggested.
Markets reacted quickly. BlackRock TCP Capital Stock Slides 14% and was branded Private Credit’s Latest Problem Child as investors digested the scale of the markdown and the concentration of trouble in a handful of names, with TCP specifically pointing to six portfolio companies that accounted for roughly 67% of the decline in the company’s net asset value, according to Capital Stock Slides. Meantime, the price of the BDC’s bonds due in 2029 dropped to near record lows as the yield investors demanded to own them jumped, a sign that credit markets were rapidly repricing the risk profile of the vehicle, according to BDC.
From one fund to “another cockroach”
The TCP Capital markdown did not occur in isolation, it landed on an investor base already rattled by a series of setbacks in BlackRock’s private credit efforts. Earlier, BlackRock Inc had deemed the private debt it extended to Renovo Home Partners to be worth zero, effectively facing a 100% loss on that private loan after having valued the exposure at par just about a month before, according to Faces 100% Loss. That abrupt swing in valuation, tied to home improvement company Renovo Home Partners, underscored how quickly private marks can move once managers concede that a borrower is in deeper trouble than previously acknowledged, as highlighted in a separate account of how Just about a month ago the same debt was still booked at par before the sharp devaluation, according to Just.
Those losses fed into a broader narrative around a private credit fund run by BlackRock that has been “getting hammered,” with Why a private credit fund run by BlackRock is getting hammered framed as “Another cockroach?” in one widely circulated analysis, according to Why. The same coverage noted that the fund said it will waive one third of its base management fee for the quarter, a rare concession that signals how sensitive managers are to reputational damage when performance stumbles, according to a separate description of how the fund said it will waive fees and that the content was Provided by Dow Jones Jan and written By Steve Goldstein, which also highlighted the figure 32 in the context of the fund’s pressures, as detailed in Provided.
Valuations, “creative” marks and the DOJ spotlight
Underneath the headline losses sits a more technical but crucial issue, how private credit managers mark their books. In recent weeks, the Department of Justice has publicly warned about “creative” marks and divergent valuation practices in private credit, signaling that the DOJ is watching how managers smooth returns or delay recognizing losses, according to an analysis of private credit markets under pressure that highlighted the Department of Justice’s concerns about the range of manager practices, as set out in private credit. That warning lands directly on situations like Renovo Home Partners, where valuations went from par to zero in a short span, and on portfolios where a handful of loans drive a disproportionate share of net asset value.
Regulators are not alone in raising questions. Rod Dubitsky, Founder of The People’s Economist and described as a Top Ranked Wall Street analyst and Personal Finance expert, has argued that some managers have reclassified troubled loans as performing before returning them to nonperforming status, a pattern he flagged in a widely shared LinkedIn post, according to Rod Dubitsky. His critique dovetails with the DOJ’s focus on “creative” marks and with investor unease that some funds may be using flexibility in valuation to protect fee streams rather than to present a fully transparent picture of risk, a concern echoed in a separate note that the Department of Justice and DOJ have zeroed in on divergent practices, as described in DOJ.
Structural stress: CLO tests, shadow banking and funding risk
The valuation debate is colliding with structural strains in vehicles that package and fund private loans. A BlackRock Inc portfolio of private credit loans bundled into a collateralized loan obligation has performed poorly, prompting the manager to acknowledge that the CLO failed key tests as bad loans mounted and cash flows were diverted away from equity investors, according to a summary of how a BlackRock private credit CLO failed key tests as bad loans increased, as detailed in CLO. That episode shows how quickly protections embedded in structured products can flip from a selling point to a constraint once performance deteriorates, especially when triggers force cash to be trapped inside the deal.
Beyond BlackRock’s own structures, the saga has revived concerns about the broader shadow banking ecosystem. One high profile case involved a $500 million blow up in which BlackRock’s loss was linked to a shadow banking arrangement where loans intended for Russian taxi app Gett were instead diverted offshore, a scandal that raised questions about oversight and due diligence in complex cross border lending chains, according to a report that said BlackRock loses $500m in a shadow banking blow up and cited James Warrington and the ticker BLK in connection with the Gett financing, as described in Gett. These episodes feed into a wider debate about whether private credit has effectively recreated bank like risks in less regulated vehicles, a concern that is now being priced into volatility gauges as Investors have been so worried about the stability of private credit that their selling drove up the VIX “fear” index, according to an account of how Investors pushed the VIX higher as private credit jitters spread, as set out in Investors.
BlackRock’s expansion push and what investors should watch next
All of this is unfolding just as BlackRock significantly expanded into private credit with its acquisition of HPS at the end of 2024, a move that cemented its ambition to be a dominant player in the asset class even as it publicly argued it is not overly worried about rising defaults, according to a profile of why BlackRock is not worried about rising defaults that highlighted the HPS deal, as described in HPS. That confidence now sits uncomfortably alongside the TCP Capital markdown, the Renovo Home Partners wipeout and the CLO test failures, each of which has become a reference point for skeptics who argue that private credit has not yet been through a full credit cycle at its current scale.
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*This article was researched with the help of AI, with human editors creating the final content.
Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
