BDCs find a liquidity valve in CLO equity secondaries
Creditflux points to BlackRock TCP Capital as one BDC using the trade to raise cash without selling loans.
Business development companies are finding a new liquidity valve in the secondary market for CLO equity, according to Creditflux. The publication names BlackRock TCP Capital Corp, BlackRock's listed BDC, as a manager that has used this route rather than sell private credit assets directly.
Selling a CLO equity tranche lets a BDC convert a structured position into cash without disturbing the loan book that drives its earnings. That likely appeals when a manager wants cash and whole loans are hard to price. It also dovetails with a broader development in private credit: Private Credit Daily has tracked how that asset class's secondary market is gaining volume from unitranche trades and redemptions from semi-liquid funds.
Creditflux's full report sits behind a paywall, and the teaser gives no dollar figures for the BlackRock TCP sales. What it does provide is a named example of a listed BDC putting CLO equity into the secondary channel. Whether that channel has enough depth to absorb more supply without pushing CLO equity prices down remains an open question.
The Wrap