The Petrolink team has been talking with two potential investors. After six weeks of due diligence, London Development Partners—a large, well-established venture capital firm with no experience in the gas business—offers a relatively small early round of investment without any tangible commitments to future rounds. The package is far from what the team had hoped for. Polish venture capital firm BRX Capital has been in business fewer than five years, but it has already made investments in the Eastern European oil and gas industry. BRX not only agrees to the capital structure that Petrolink proposes, it also agrees to invest both the first- and second-round equity amounts. One of the start-up’s main objectives has been to ensure that no one investor has too much clout, so the arrangement proposed by BRX suits them.

After six weeks, LDP finally came to the point. “It’s good to see you chaps again,” said Charles, welcoming them to LDP’s oak-paneled offices in London Wall. “The material you sent last week has eased our concerns about the Gazprom situation, so we’d like to talk today about what sort of deal might be possible for us.”

“They won’t bite,” replied Per. “Everyone wants to save their money for the new leases. Anyway, none of us has any experience in managing a pipeline. And we’d probably still have trouble keeping the flow data under wraps. Why would we trust each other any more than we trust Gazprom? No, we really need a third party to do it for us. Do you think Beckman might be interested?”

Robert Jameson, Karl Fenstermann, and Nigel Ritson are facing a problem: what to do about BRX’s deceptive alteration of the antidilution clause in the contract offered to them. But they are also confronting difficulties because of their desires and decisions concerning the BRX contract.

And Shenyang, the capital of Liaoning province, has become predatory, increasing the collection of non-tax fees by 57% this year.  Last week, thousands of stores and restaurants closed for three days as owners heard that “rapacious” officials planned to knock on doors to impose “fat fines” to finance China’s National Games, which will be held in the city next year.  Shenyang officials quickly denied the plan, but owners, not wanting to take chances, remained shuttered nonetheless.

Robert brought in Philip Calthorpe, a former senior vice president of a large London-based investment bank, as a financial adviser. He felt that a deal could be struck with a capital structure of approximately one-third equity, one-third debt, and one-third vendor finance, which Beckman would provide. Philip estimated the funding requirements at nearly €42 million (of which €37 million was capital expenditure), phased over several rounds of equity and debt. He suggested they offer the first-round equity investors a 28% stake for an initial €4 million.

“Anyway,” he continued, “it’s only a temporary solution. That 16-inch pipeline won’t have the capacity to handle Helmark’s output. The independents will need their own—one twice the size, if the field’s as rich as I think it is.”

Understanding what spending you’re prepared to reduce or stop in the event of a stock market meltdown or persistently low investment returns is your first line of defence against running out of money.

So why is there a sudden cash squeeze in at least five states, home to more than 300 million people?

Despite everything, some cities are getting funding for new projects, but that’s only because the CBRC has essentially ordered the banks to shovel funds to the uncreditworthy local government financing vehicles.  Just months ago, Chovanec notes, these borrowers were on the “do-not-lend list.”  Yet many localities, even after the lending taps were opened, are still cash-strapped.

When shops close to avoid predatory officials, we know China’s coffers are almost empty.  And to make matters worse, the country’s financial problems will be harder to solve now that the country’s balance of payments has turned negative.  The net outflow in the second quarter of this year was the first since 1998.  The country’s reserves also dropped in Q2.  We should not be surprised: there was perhaps $110 billion of capital flight during that period, and the gusher outflow looks like it continued in June.  Chinese citizens are losing confidence fast.

“I already know the person,” said Karl. “My number two, Nigel Ritson, spent ten years at Transco, the company that runs Britain’s gas grid. He’s in his thirties and hungry. I think he’d jump at the chance.”

"We are in this crazy position where there is no lender of last resort for Greek banks," said a banker, referring to the perceived flaw in the eurozone that the ECB is much less able to create money to help a member state like Greece than the Bank of England can do for the UK or the Federal Reserve can do in the US.

But what if he, Karl Fenstermann, were to operate the pipeline? As a vendor, Beckman could finance some of the construction, and if he could get commitments from Per and the other independent producers that they would use the pipeline, why shouldn’t he be able to raise more money? Once the gas started flowing, whoever operated the pipeline would be drowning in cash. He looked up, and for a moment the clouds parted and he saw a brilliant full moon, high in the sky.

"I hated the job from day one, but I stayed with it because I was promised a secure pension," said Van Alstyne, now 64.

Why has the economy so far failed to respond?  There are various reasons, but perhaps the most important is that the country is running out of money for stimulus.

So how bad is the situation?  Anne Stevenson-Yang of J Capital Research reports that the tax bureau of one of China’s largest cities “has no money.”  Its officials, incredibly, have been told to collect their own salaries from taxpayers directly.  The breakdown of government in that city is also evident across the country, where localities are now desperate for revenue.

“What’s the story here, Walter?” asked Robert. Walter’s face went red. His body language made it plain that the changes in the antidilution clause had been intentional. The lawyers, however, were much smoother, blaming the discrepancy on a typing error made by a junior staff member. They left the room, ostensibly to find out what had gone wrong. “We’ve worked with them for years,” said Lech. “It must be a clerical error.”

LDP’s roots were in private equity investing, and over the past 20 years it had built a portfolio of early-stage investments in companies that were mostly, but not exclusively, technology based. LDP typically would provide a relatively small early round of investment to enable the founders to prove the viability of their concept, build prototypes, and attract beta customers, and then follow with additional rounds of investment to help the company develop. It was common for LDP to bring additional investors into syndicates to fund these later rounds, both to share the risk and to provide the sometimes large amounts of capital that were necessary to fully take advantage of the opportunity as it developed.

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This is known as a deferred payment.

When he retired in 2006, he was receiving his full pension. But the fund was hit hard during the financial crisis and never fully recovered. A 2016 report projected it would run out of money as soon as 2026.

Despite a brief flash of sunshine, the wind stayed strong, and at 3:00 pm, Per announced that the start of operations would be postponed until the morning. Following a tour to inspect some of Beckman’s latest innovations in rig design, the two men joined the rig’s senior management in the mess for dinner, and they spent a lively evening swapping war stories. Per and the production superintendent went way back, and Karl’s presence didn’t inhibit them.

So why is there a sudden cash squeeze in at least five states, home to more than 300 million people?

But an extra £29m was also racked up due to a number of reasons including the collapse of Carillion earlier this year and a massive inflation in construction costs.

Officials have also suggested that malfunctioning cash machines and a failure to replenish many in time has led to the shortage. Economists wonder whether the shortage could be a result of a mismatch in currency circulation and economic growth since the controversial currency ban.

Officials say payments to farmers for summer crops and meeting expenses in the forthcoming elections in Karnataka could have triggered the surge in demand for cash.

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“Have we done well or was this a development that should not have gone ahead?”

In my career as an entrepreneur and an adviser to entrepreneurs, I have faced this dilemma before, and I would recommend that Petrolink take BRX’s money—but only the first tranche. Robert is correct that accepting funding from potentially untrustworthy investors is very risky, but Petrolink’s management can mitigate this risk by meeting the plan’s targets; bringing in a strong second investor quickly; continuing to control the majority of the company; basing the company in a jurisdiction where the rule of law is powerful; and controlling the local operations.

She said: “When we actually balance all of the public subsidy and investment to the return to the citizens of this city over the next 20 years, where do we actually balance out?

The project is now in limbo with no budget currently available to deliver Phase 2.

Committee members posed serious questions about the project as well as the fact that council bosses – save for two senior officers – were not informed of the increasing costs.  

There are many imponderables to a new venture in Eastern Europe. Institutions are still fragile, business environments unstable, and courts inexperienced in dealing with complex business agreements. These considerations make trust crucial. Because each party has a certain measure of control, the VC–entrepreneur relationship is inevitably interdependent. The VCs may hold the purse-strings, but they usually need the entrepreneurs to run the company and for information, expertise, and local networks. Unless each side feels that it can trust the other not to abuse its power, the relationship will not produce a win-win outcome.

It is another matter that Indians returned almost all of the money - some $240bn (£169bn) - to the banks, and the currency gamble is now widely acknowledged, in the words of an economist, as a "failure of epic proportions".

As of this moment, banks are expecting that they will continue tomorrow to provide cash, up to €60 per account, via ATMs, and some branches may open to pay pensions.

But they wait to learn what restrictions they will face thereafter.

Until now, cash-strapped plans have survived by reducing future retirees' benefits and asking employers to contribute more money.