Letters of Credit (LC) refinancing refers to a financial arrangement where Mustang(The new lender) extends credit to a borrower by using a letter of credit as collateral. A letter of credit is a financial document issued by a bank on behalf of a buyer (applicant) to the seller (beneficiary), guaranteeing payment for goods or services once the terms and conditions specified in the letter of credit are met.

In the context of refinancing, a borrower who holds a letter of credit may use it as security to obtain a loan or credit facility from another financial institution. The new lender essentially takes the letter of credit as collateral for the loan. This type of financing can be particularly useful for businesses that have a letter of credit but need additional funds or liquidity.

The process typically involves the borrower and the new lender negotiating the terms of the refinancing agreement, including the amount of the loan, interest rates, and repayment terms. The letter of credit serves as a guarantee for the new lender, mitigating the risk associated with the loan.

It's essential to note that the specifics of letters of credit refinancing can vary based on the terms agreed upon by the parties involved and the applicable regulations. This financial strategy allows businesses to leverage existing letters of credit to access additional capital for various purposes, such as working capital, expansion, or other financial needs.