Distressed debt opportunity – The Flight and Partners Recovery Fund

For very experienced investors only

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Invest in an asset class not easily accessible to individual investors – target 15% total annual return: income plus equity upside (not guaranteed)

The UK has experienced its deepest recession since records began. 

The Covid-19 crisis brought activity in some sectors to a complete halt. Many companies – including otherwise sound businesses – will have burned through their cash reserves and might be struggling to service their debt. Traditional financing options might prove inaccessible.

It is a dire outlook, but one which could create a fertile hunting ground for “special situations” or “distressed debt” funds, such as The Flight and Partners Recovery Fund Limited (the “Fund”)

The Fund was established in 2008 (just before the previous global recession) by Lord Flight – former Conservative MP and one of the architects of the Enterprise Investment Scheme – specifically to invest in deals originated and advised by renowned turnaround specialist Jamie Constable from Rcapital Partners LLP (“Rcapital”).

Rcapital has been operating since 2004 and has made over 70 investments to date, whilst building a strong market position and reputation in this specialist investment niche.

Historically, exits have been achieved in under two and a half years and delivered attractive returns to date.

Rcapital believes the current crisis will create an unprecedented wave of highly attractive investment opportunities for the Fund. To capitalise on this, the Fund is raising £50 million into a new share class (£20 million minimum targeted for the first close). 

Family offices and other ultra-high net worth investors are expected to participate in this fundraise. Wealth Club is the only service that gives experienced non-institutional investors access to this opportunity at a significantly reduced minimum investment of £20,000.

The Fund’s investments will be made in the form of secured loans and target total annual returns of 15% a year: a combination of dividends of 5–6% after year two plus a share of any equity upside on exit (neither are guaranteed). The loans are secured by fixed or floating charges over the borrower’s assets. The aim – which is in no way guaranteed – is to provide investors with Private Equity-level returns with the added benefit of debt-like income and downside protection. Please note, though, this is a high-risk investment for experienced investors only. 

This could be an opportunity – not usually accessible to individual investors – to get exposure to this potentially highly rewarding, albeit high-risk, area.

Investor capital is expected to be deployed after the first close. The second tranche won't be available until after the first £20 million is invested.

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.


  • Potentially well-timed opportunistic strategy 
  • Record-high number of otherwise sound companies expected to be in financial distress
  • Market-leading specialist turnaround investor with advanced deal pipeline
  • Overall target annual return of 15% IRR: expected dividend yield of 5-6% after year two, plus share in equity upside on exit – high risk and not guaranteed
  • Secured loans with first or second charge over company assets 
  • Strong track record of delivering attractive returns on exit to date
  • Asset class not easily accessible to individual investors
  • Offer seeks to raise £50 million, subject to a minimum of £20 million targeted for the first close
  • Exclusive minimum investment £20,000 (usually £100,000)

Video interview

Watch our interview with Jamie Constable of Rcapital, recorded 3 November 2020.

The investment adviser – Rcapital Partners LLP

The investment team is led by Rcapital’s founder, Jamie Constable, who has been involved in turnarounds since the late 1980s and has built an impressive track record through different economic cycles (including two previous recessions). 

His expertise has earned him a number of accolades including a place in Credit Today’s Top 50 influencers list, an Insolvency and Rescue Award for Best Rescue Funder, the TMA’s European Turnaround of the Year award and most recently he was named the IFT’s Investor of the Year. Past performance is not a guide to the future.

Chris Campbell heads the investment team, which is responsible for sourcing and structuring investments. Both Chris and Jamie have in-depth knowledge of insolvency laws and are highly skilled at structuring and completing deals in a very short timeframe, which is crucial in stressed and distressed processes. 

Prior to joining Rcapital in 2014, Chris worked in KPMG’s Transactions and Restructuring team for ten years, principally advising corporates and lenders on how to maximise value on exit, typically in turnaround and distressed scenarios. Chris is supported by four investment professionals. 

COO Phil Emmerson is responsible for the performance of the portfolio. Once the investment team has completed the purchase of a business, Phil’s operational team takes over, working with the management team of the business to execute the agreed turnaround strategy. Phil’s team members bring particular areas of expertise, including business turnaround, HR, marketing, finance, and technology.

Investment strategy

The Flight and Partners Recovery Fund aims to achieve attractive risk-adjusted returns over the economic cycle through investment in stressed and distressed small- to medium-sized UK businesses.

As plain-speaking founder Jamie puts it, Rcapital focuses (and has always focused) on “good businesses that have got themselves into trouble”.

Rcapital will look to use its reputation as a go-to turnaround investor within the lower-mid market to secure favourable deals from its network of restructuring and M&A advisers, banks, private equity and corporates.

Only a small percentage of the opportunities Rcapital assesses (c.1,000 a year) are expected to pass its stringent investment criteria and make it to offer and completion stage. Rcapital has a well developed pipeline of opportunities across a range of sectors, with five companies at offer stage. 

Post investment, Rcapital aims to use its restructuring and business turnaround expertise to improve the performance of the acquired businesses and make them attractive to potential buyers in preparation for an exit.

What does Rcapital look for in companies? How does it add value? This short video produced by Rcapital gives a quick overview.

Target returns

The Fund targets an annual total return of 15% per annum net of management fees, not guaranteed. The Fund expects to pay a bi-annual dividend yield of at least 75% of the net income attributable to the A shares – this is expected to be equivalent to a yield of 5-6% from the first full year of investment (expected to be year 2) – not guaranteed. 

The Fund aims to provide loan facilities to portfolio companies at an annual interest rate of 10%. The Fund is entitled to 100% of the interest payments. Upon exit, the Fund will be entitled to a 30% share of Rcapital’s equity upside in the business.

The Fund aims to mitigate some of the inherently high risks of investing in this asset class by giving investors some form of downside protection (please read the offer documents for more details). 

Please note: despite the downside protection, this remains a high-risk investment. Returns are not guaranteed and you could lose all your capital.


The new share class aims to invest in four to six companies per year, deploying £20 million to £30 million per annum, and to be fully invested by the end of the second year. From the third year on, new investments are expected to be funded by the proceeds of exits from the first cohort. 

Once fully invested the Fund will look to hold a portfolio of 12-15 companies operating across a diverse range of sectors. No single company investment (at cost) will account for more than 20% of the portfolio. Should Rcapital come across a deal that requires more capital than the Fund could provide, Rcapital may invest alongside the Fund to secure the transaction.

See more company examples and full details of the investment returns in our research report. 

Previous portfolio company examples

Morses Club – The Flight and Partners Recovery FundMorses Club plc 

Morses Club is a leading provider of home-collected credit. It provides small loans to its customers and collects repayments weekly from the customers’ homes. 

The investment in Morses Club was not a distressed acquisition. The company was acquired from a distressed seller, London Scottish Bank Plc, which had acquired Morses Club in 2004 to boost the performance of its existing home-collected credit business. Following the sub-prime crisis, London Scottish Bank Plc was placed in administration in November 2008. Rcapital was introduced to the opportunity to acquire Morses Club by a business contact and completed the acquisition in April 2009.

Rcapital implemented a cost reduction programme, improved marketing efficiency, sought to increase the quality of the loan book, successfully merged Morses Club with a significantly larger rival, and made eight further bolt-on acquisitions. Morses Club was exited via an IPO on AIM in April 2016 with a day one market capitalisation of £140 million.

The Fund did not invest in Morses Club.

I was recruited as Deputy CEO in October 2014, at the end of the operational integration of Morses Club and Shopacheck, and was privileged to enjoy the most thorough induction into a business that I’ve ever witnessed. By the time I was appointed to the top job a few months later, I’d had a proper ‘Rcapital grounding’, to ensure I that had all of the tools to succeed. Within six months, they decided to float; and we were listed a little over a year after I became CEO. They have been hugely supportive, highly commercial and great fun to work with. Phenomenal.

Paul Smith, CEO, Morses Club plc

Rolling Luggage – The Flight and Partners Recovery FundRolling Luggage

Rolling Luggage is an airport retailer of branded luggage. It was a subsidiary of Tie Rack Retail Group (“Tie Rack”), a retailer that had succumbed to the pressures of online competition, global recession and a change in workwear preferences. 

Under Tie Rack's ownership, Rolling Luggage was successful but suffered from financial and operational under-investment. With two distinct businesses, each experiencing varying levels of success and exposed to differing consumer behaviours, Rcapital was able to structure its investment so as to exit the failing Tie Rack business whilst unlocking the long-term value in Rolling Luggage.

Rcapital introduced its own management team to the business and implemented an international turnaround strategy. This reduced financial losses from €21.2 million to €3.2 million between 2013–2015, and saved 350 jobs. Rolling Luggage was later sold to Samsonite, the world’s largest luggage brand. 

When Rcapital acquired the Tie Rack Retail Group we were weeks away from Administration. The planning, energy, commercial focus and ability to execute that they brought to the party was simply incredible. I have never witnessed such a relentless period of activity; and yet it was the most enjoyable period of my career. The sale to Samsonite within just a year was the icing on the cake.

Alex Willson, Managing Director, Rolling Luggage

The Artful Group Limited – example of a previous failure

As can be expected, not all investments work out as planned and some inevitably fail. The Artful Group Limited, (“Artful”) is an example. 

Artful was an established publisher of art and photography which primarily sold art to UK retailers including IKEA and Next. Following its initial investment, Rcapital discovered there was a fraud in the company and a resultant cash flow gap. Artful was placed into administration and sold via a trade sale. Rcapital recouped 40% of its initial investment.

Exit strategy

The Fund will have an initial term of seven years, after which there will be a shareholder continuation vote. Shareholders should not expect and are not entitled to any realisation of their investment until the Fund is wound up. 

There is no fixed date upon which the Fund will be wound up and its duration will be subject to periodic review by the Board and votes of Shareholders in accordance with the Articles.

Tax treatment

This is a Guernsey fund that will apply for exempt status for Guernsey income tax purposes. 

There are no tax reliefs associated with this investment for UK taxpayers.

Any income returns are expected to be paid as dividends and will be taxed accordingly. Any gains on sale or redemption of the shares in the Fund should be taxed as a capital gain for UK investors. Please remember, tax benefits depend on circumstances and tax rules can change: if you're not sure please seek specialist tax advice.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

Below are some of the main risks. Before you invest, please carefully read the Risks and Commitments on the Wealth Club website and the Offering Memorandum to ensure you fully understand the risks. Distressed or stressed investments are very high-risk – by definition, the Fund will be investing in troubled companies. There is no guarantee the turnaround will be successful and that the companies will be able to repay the loan and/or be sold at a profit.

Accordingly, investors may not be able to recover some of – or even the whole of – their investment, nor is there any guarantee the companies will be able to repay the loan and/or be sold at a profit.

There are risk-mitigating provisions in place, but you could still lose all your capital. Companies might be unable to trade for a prolonged period – for instance, if further lockdown measures were to be introduced – potentially causing the turnaround strategy to be delayed or even fail altogether, resulting in a total loss for the Fund. 

Investment in the Fund is illiquid and long term – an initial close is expected after seven years but could be delayed, subject to shareholder approval.

Investment in the Fund should only form a small part of a large and balanced portfolio. You should not invest money you cannot afford to lose. Before you invest, please carefully read the Offer Memorandum, alongside the Wealth Club Risks and Commitments, to ensure you fully understand the risks. Tax rules can change and benefits depend on circumstances.

Investors will be subject to the laws of Guernsey. Guernsey law does not make a distinction between private and public companies and some of the protections and safeguards that investors may expect to find in relation to a public company under UK law are not provided for under Guernsey law. 

Pending investment, client money will be held in Praxis Fund Services Ltd's client money account and will be subject to Guernsey client money and deposit protection rules, not UK rules. 

The Fund is not regulated by the FCA and is not covered by the UK Financial Services Compensation Scheme.


The Fund has an annual management fee of 2% per annum and an annual administration fee equivalent to 0.125% of the net asset value.

When you invest through us, Wealth Club will receive an initial fee of 2%. This is paid by the product provider so there is no additional charge to you.

Wealth Club investors will invest using a nominee structure. This service is provided by subsidiary companies Wealth Club Asset Management Limited and Wealth Club Nominees Limited and is covered in a separate Nominee Services agreement. Investors will be charged an annual fee of 0.5% for the nominee service. Please see more details in the Schedule of Charges

Once investor subscriptions are received by Wealth Club Asset Management Ltd, funds will be sent to the client money account of Praxis Fund Services Limited pending the shares receiving approval to list on The International Stock Exchange. The listing is expected on or around 4 January 2021. Praxis Fund Services is licenced by the Guernsey Financial Services Commission. Wealth Club Asset Management has given Praxis permission to hold client money for its clients in this instance.

The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details. 

Our view

In our view, this could be an attractive offer at a highly opportune time. 

The pandemic crisis is causing unprecedented widespread economic disruption. Companies are facing significant challenges and, once the government’s support measures are wound down, many fundamentally sound businesses are likely to find themselves in financial distress and unable to access credit. 

This could create a fertile environment for those seeking to invest in distressed opportunities. However, acquiring companies in distress is not for the fainthearted or inexperienced. The risks are very high, and to be successful great skill and diligence are needed, as well as a range of complementary competences, including deep knowledge of insolvency law and operational experience. 

The Fund’s Investment Adviser, Rcapital, should be able to provide that. Its founder has been investing in distressed companies since the late 1980s through different economic cycles. 

Rcapital’s investment strategy appears well defined and well rehearsed. Since 2008, it has acquired 51 companies and exited 34, 26 profitably. The average exit has occurred in less than 2.5 years.

In addition, Rcapital is heavily incentivised to deliver attractive returns to the Fund in excess of 10% per annum and achieve exits at a profit. 

It is worth noting that this asset class is usually the preserve of hedge funds and private equity firms which typically receive investment – usually a six-digit figure as a minimum – from the likes of institutional investors and family offices.

The timing of the offer and quality of the Investment Adviser could be an enticing combination in our view, particularly with a minimum investment of £20,000 – however, you should form your own view. 

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 

The details

Distressed Debt Fund
Target raise
£20 million (first close)
Minimum investment
£20,000 (usually £100,000)
Target return
Register your interest
Last updated: 22 December 2020