BlackRock private credit fund’s valuations are probed by DOJ

Federal prosecutors are scrutinizing valuation practices at a Black Rock Inc. private credit fund, according to people with knowledge of the matter. The Manhattan US Attorney’s office in recent months has been seeking information about Black Rock TCP Capital Corp., a publicly traded business development company, said the people, who asked not to be identified discussing a private matter. Executives have been questioned as part of the probe, one of the people said. A representative for Black Rock declined to comment. A spokesperson for the Southern District of New York didn’t respond to a request for comment. Jay Clayton, who runs the SDNY, said in November he was concerned about how firms value private assets — and that “people should know that the financial regulators and the department are looking at those.” This week, while downplaying concerns about an imminent financial crisis from private credit, Clayton reiterated at a Managed Funds Association conference that “if people are mismarking in order to generate fees, that’s always been a no-no.” It’s not immediately clear whether the probe of the BlackRock fund, which trades under the ticker TCPC, is part of a broader SDNY inquiry. Probes can end without charges being filed. TCPC filed a rare off-cycle disclosure in January that said it expected to slash the value of its assets by 19%. That sent shares of the fund plunging 13% on Jan. 26, the most since March 2020. A number of class-action lawsuits have since been filed on behalf of investors that claim it made “materially false” statements and that it didn’t properly value its loans. The portfolio markdown was among the starkest examples of how quickly valuations can change in the $1.8 trillion private credit market. Investors in BDCs rely on the values ascribed to the loans, since there is no active market where the assets trade. Marks are therefore a key factor in determining at what price investors can enter or exit the fund, and they also impact the fees manager