As noted in prior posts on this site, trouble recently has been brewing in the private credit market. Borrower defaults have led to bankruptcies, civil lawsuits, and even criminal indictments. D&O litigation has now arrived on the lender side as well, as earlier this week an investor filed a securities class action lawsuit against BlackRock TCP Capital Corp, the private credit arm of finance giant BlackRock. As discussed below, the new lawsuit highlights the ways in which the current turbulence in the private credit sector can translate into D&O claims, including in particular claims against private credit lenders. A copy of the BlackRock TCP Capital complaint can be found here.

Background

BlackRock TCP is a business development company (BDC) that raises funds from investors and then uses those funds to make loans to small and midsize businesses as an alternative to bank financing. BlackRock acquired the firm’s investment advisor in 2018. The firm’s shares are publicly traded on Nasdaq.

Among factors the company tracks to measure its financial health, the company reports on its “net asset value,” which in turn impacts the trading price of the company’s shares. Net asset value (NAV) refers to the value of the Company’s underlying assets, minus their total liabilities. Calculating the net asset value depends on the company making an estimate of the fair value of the firm’s assets.

On February 27, 2025, the company issued a press release reporting on its fourth quarter and full year 2024 financial results. Among other things, the press release disclosed that the number of portfolio companies on non-accrual status had more than doubled, and that the company’s NAV had fallen over 22% during the year. Loan losses, realized and unrealized, had increased 186% largely due to the addition of a newly added $72 million unrealized fourth quarter loss. Despite these developments, the complaint alleges, the company represented that its present NAV of $9.23 per share was accurate and that “the vast majority of the Company’s portfolio continued to perform well.” The company’s share price declined nearly 10% on this news.

On January 26, 2026, the company disclosed certain fourth quarter and full year 2025 financial results, including that the Company’s NAV per share as of December 31, 2025, was in the range of $7.05 to $7.09, 19% less than reported the prior quarter and 23.4% less than reported the prior year. According to the complaint, the company’s shares declined nearly 13% on this news.

The Lawsuit

On February 3, 2026, a plaintiff shareholder filed a securities class action lawsuit in the Central District of California against the company and certain of its executives and officers. The complaint purports to be filed on behalf of investors who purchased the company’s securities between November 6, 2024, and January 23, 2026.

The complaint alleges that the defendants failed to disclose to investors: “(1) the Company’s investments were not being timely and/or appropriately valued; (2) the Company’s efforts at portfolio restructuring were not effectively resolving challenged credits or improving the quality of the portfolio; (3) as a result, the Company’s unrealized losses were understated; (4) as a result, the Company’s NAV was overstated; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the plaintiff class.

Discussion

The private credit industry, which includes companies like BlackRock TCP Capital and other kinds of firms, operates through non-bank lending, mostly to small and mid-sized companies. These kinds of lenders stepped into the gap created after the global financial crisis, when regulatory changes made banks less willing to lend to certain borrowers. The industry has grown rapidly in recent years.

A series of high-profile corporate failures – including, for example, Tricolor and First Brands – highlighted growing credit risk within the private credit market and raised concerns about the quality of the underlying loans, particularly with respect to loan valuations and transparency.  The Tricolor and First Brands failures also raise concerns about possible borrower fraud.

As detailed in prior posts on this site (here and here), the Tricolor and First Brands collapses have resulted in D&O claims against the firms and their executives. Both of those examples involve private credit borrowers.

This latest private credit-related lawsuit against BlackRock TCP Capital may be differentiated from the prior claims involving Tricolor and First Brands because it involves not the private credit borrowers, but rather because it involves a private credit lender.

The new lawsuit against BlackRock TCP Capital is not, however, the first securities class action lawsuit involving a private credit lender.

For example, and as discussed here, in December 2025, Blue Owl Capital, one of the largest private credit lenders, was sued in a securities class action lawsuit, in a case alleging that Blue Owl and the other defendants misrepresented the firm’s liquidity, redemption conditions, and the merger risks involving its private credit vehicles. A different investor filed a separate lawsuit against Blue Owl in January 2026, as discussed here, alleging that the company had misrepresented the level of investor redemptions the company was facing.

Problems in the private credit sector seem likely to continue in the weeks and months ahead. Concerns about loan quality and possible fraud, arising among other things from the Tricolor and First Brands situations, will continue to weigh on the firms. By the same token, concerns about valuation and about redemptions will also weigh on private credit firms. In particular, spikes in redemptions could firms to sell assets, revise redemption policies, which could further undermine investor confidence.

Readers interested in thinking more about the underwriting risks associated with the current turbulence in the private credit segment will want to review the prior posts on this site written by frequent guest contributor Sarah Abrams. Her prior posts, which discuss in greater detail the source of the concerns in the private credit industry as well as the associated potential D&O liability exposure, can be found here and here.

The problem for all of us is trying to think about how big the problems in the private credit market will prove to be. While there is nothing at the moment to directly suggest that the issues in the private credit market involve the same kind of systemic risk that caused the subprime crisis to become of global financial crisis, memories of that prior crisis are too fresh to simply dismiss the possibilities. Even if the possibility of another global financial crisis is unlikely, the possibility of a correction – perhaps a painful one – cannot be ruled out.

Maybe these concerns are overstated. I certainly hope so. However, and just the same, I am going to be keeping an eye out for further developments involving firms in the private credit sector. I am sure I will not be the only one.