Letters of credit (L/Cs) may prove useful to a clutch of creditors who are owed money in one of the spectacular dot.com crashes of recent months. Internet service provider PSINet warned investors on 4 April that it was short on cash, casting a shadow over the company's future.

A PSINet statement said consultants had been engaged to prepare an independent valuation of "certain potentially impaired assets" and added that additional restructuring and impairment charges "may be significant." The statement also said that "rapidly changing circumstances" had prevented the company from filing its 2000 financial statements within the prescribed period.

"There can be no assurance that the company will not run out of cash," PSINet has warned. As of 30 March the company had cash, cash equivalents, short-term investments and marketable securities held in financial institutions of approximately US$254 million. But the expected proceeds from asset sales are not expected to be sufficient to meet the company's anticipated cash needs.

Some creditors have however mitigated the risk of non-payment from one of the world's first and largest Internet service providers by insisting on letters of credit (L/Cs), which could be invoked if payment through normal channels is not received. According to PSINet, some $27 million of its declared assets will, if necessary, secure its obligations under L/Cs and similar instruments.

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