Transfer and Convertibility (T&C) Risk
Corporate Credit Analysis glossary · Ratings, Syndication & Market Dynamics
Definition
The risk that a sovereign imposes capital controls preventing domestic corporates from servicing foreign-currency debt. Captured in country-ceiling methodology.
Transfer and Convertibility (T&C) Risk in plain English
When a company borrows in a foreign currency (say a Brazilian firm that owes dollars), it eventually needs to convert its local money into those dollars and send them abroad to pay the lender. Transfer and Convertibility risk is the danger that its own government slams the gate shut — banning or limiting those conversions and transfers to keep money inside the country during a crisis. So the company might have plenty of cash and every intention to pay, yet still default simply because the government won't let the dollars out. Analysts cap how high they'll rate a company partly because of this risk — a firm usually can't be seen as safer than the country it's trapped in.
Also called: T&C
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