Investment Management Agreement

                                                                    EXHIBIT 10.7

                      BLACKROCK KELSO CAPITAL ADVISORS LLC
                             WAIVER RELIANCE LETTER

                                  July 25, 2005


BlackRock Kelso Capital Corporation
40 East 52nd Street
New York, NY 10022


Ladies and Gentlemen:

     BlackRock Kelso Capital Advisors LLC (the "Advisor") and BlackRock Kelso
Capital Corporation (the "BDC") have entered into an Investment Management
Agreement, dated July 25, 2005 (the "Management Agreement"), pursuant to which
the Advisor has agreed to furnish investment advisory services to the BDC and
the BDC has agreed to pay a management fee (the "Management Fee"), on the terms
and subject to the conditions of the Management Agreement. Capitalized terms
used but not defined herein shall have the meanings given to them in the Private
Offering Memorandum of BlackRock Kelso Capital Holding LLC. The advisor hereby
agrees with the BDC as follows:

1.    The Advisor hereby waives its rights to receive 50% of the amount of the
     Management Fee the Advisor would otherwise be entitled to receive from the
     BDC until the first date on which 90% of the assets of the BDC are invested
     in portfolio companies in accordance with the BDC's investment objective,
     excluding investments in cash, cash equivalents, U.S. government securities
     and other high-quality debt investments that mature in one year or less
     from the date of investment, or the Ramp-Up Date, whichever is sooner.

2.    Thereafter, the Advisor hereby waives, until such time as the BDC has
     completed an initial public offering of its common shares registered under
     the Securities Act and listed such common shares on a national securities
      exchange (collectively, the "Public Market Event"), 25% of the amount of
     the Management Fee the Advisor would otherwise be entitled to receive from
     the BDC.

3.    In addition, the Advisor hereby

     (a)   waives Management Fees for any calendar year in excess of $11.936224
          million until the earlier of (i) such time as the BDC has completed
          the Public Market Event or (ii) the fourth anniversary of the
          commencement of operations of the BDC and

     (b)   waives its Management Fee in excess of $5.570238 million during the
          fifth year of the BDC's existence unless the BDC has completed the
          Public Market Event.

     Supporting calculations with respect to the waiver thresholds are contained
     in the attached spreadsheet.

     Pl