Letter of Credit

Question

Could someone tell me the meaning of the word "outstanding" in the following sentence? “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all issued and outstanding Letters of Credit at such time; plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Company at such time.

Mister Micawber · Accepted Answer

Outstanding = still unexercised (still not paid out).

Anonymous · Answer

Hi,

Mister Micawber,

Thanks a lot for your answer.

I want to further look into this sentence. Below is a simple diagram for the letter of credit:

First, the importer will apply for opening a Letter of Credit ("LC") with the LC Bank, then the LC will be transferred by the LC bank to the Paying Bank, then the Paying Bank will notify the exporter, then the exporter will present the necessary documents to the Paying Bank, then the Paying Bank will make payment to the exporter, then the Paying Bank will transfer such documents to the LC Bank for reimbursement, then the LC Bank will require the importer to make payment, then the importer will make payment to the LC Bank and obtain the documents for picking up the goods.

So, there are at least three payments here.

Paying Bank ? Exporter

LC Bank ? Paying Bank

Exporter ? LC Bank

I want to know which payment you refer to when you say "still not paid out".

I guess it refers to the third payment, but I am not sure.

Mister Micawber · Answer

It depends on whose organization your original text refers to.

Anonymous · Answer

Hello, Mister Micawber,

When I said "A letter of credit outstanding", I stand on the Bank's side.

Mister Micawber · Answer

Which bank, the issuing bank or the paying agent?

Letter of Credit

Could someone tell me the meaning of the word "outstanding" in the following sentence?

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all issued and outstanding Letters of Credit at such time; plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Company at such time.

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