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Letters of Credit (LC, ILC & Pay Order) 

Letters of Credit (LC, ILC, Pay Order) - Cash them in for real dollars.

Value conversion depends on many factors, some fixed, some floating such as:

• Type of letter of credit varies and includes (SBLC, ILC, LC, Pay Order, etc.)

• Issuing bank rating as well as location (branch) of bank issuing the instrument

• Instrument Must Be in US Dollars only

• Bank policy

• Market conditions

• Client anticipation of return

• Place transaction occurs

What is done with 'Cash' after conversion

This is becoming a paramount issue with banks converting the instrument, the preferred and acceptable method is to deposit a portion of the redeemed funds with the honoring bank, usually not less than 20% for a period of not less than six (6) months.

Hints

• These types of Bank Instruments can be issued to individuals, corporations, trust, pension funds, endowments, non profit organizations, or to any payable entity.
  Individuals who hold such an instrument may have problems with 3rd party transactions
  or banks. 

• LC, ILC, or SBLC are often times issued for the sale and purchase of tangible assets.    

• It is often easier to raise a 'Credit Line' than convert the instrument to CASH!    

• Fluctuating World Market Conditions set the pace and determine the trading value, if any.    

• Usually most every instrument can be converted, however, some are just not desirable   Trading Instruments on the current World Market.   

• Certain Required "Documentation' is needed for this type of transaction.

The Following Bank Instruments are very difficult to do at the present, and only a 'Credit Line' could be raised:

• Any Bank Instrument issued from any Indonesian Bank    

• Any Bank Instrument issued from any Thailand Bank    

• Any Bank Instrument issued from any Philippine Bank    

• Any Bank Instrument issued from any Malaysia Bank

The following are not currently tradable unless in US Dollars:

• Bank Instrument issued from Russia

• Bank Instrument issued from Vietnam

• Bank Instrument issued from Cambodia

• Bank Instrument issued from Laos

• Bank Instrument issued from Burma

• Bank Instrument issued from Malaysia

Recommended further reading:
Standby letters of credit: The private primary market
The mechanics of prime bank SLCS and guarantees
Documentary and Standby letters of Credit