Better Capital recoups £19m from City Link - but unsecured creditors, including 1,000 drivers, to get 1p in the pound

The courier group collapsed on Christmas Day last year with the loss of 2,356 jobs

City Link's 1,000 self-employed van drivers are likely to miss out on any redundancy payments (Getty Images)

Better Capital, run by the private equity veteran Jon Moulton, has recovered £19m from City Link since March – despite the failed parcel delivery firm leaving scores of creditors including delivery drivers out of pocket.

The courier group collapsed on Christmas Day last year with the loss of 2,356 jobs and leaving unsecured creditors without payment. Better Capital, which is higher in the pecking order of creditors, would eventually retrieve £22m from the liquidation of the company, it said – £2m more than originally thought. It had originally invested £40m in the venture.

Better Capital is classified as a senior creditor after making a secured debt investment in the company.

A report by the administrator, EY, over the summer showed there was £1.2m owed to lower-ranking preferential creditors but that unsecured non-preferential creditors would get back only 1p in the pound.

City Link had about 1,000 self-employed van drivers, who are likely to miss out on any redundancy payments due to their classification as non-preferential creditors. EY is still working on the administration process.

MPs have previously criticised Better Capital and Mr Moulton over their handling

of the company’s collapse. Better Capital hit back at the report and said it was “dismayed” by the accusations.

The City Link debacle contributed to a 22.6 per cent fall in the value of Better Capital’s 2012 fund, which owned City Link and firms including the fashion chain Jaeger and the double-glazing specialist Everest.

Better was forced into huge writedowns on many of its companies in the six months to 30 September after poor trading. Everest’s value was cut by £16m, the stationery group Spicers-OfficeTeam by £35m, and the aerospace company CAV by £28m.

It also had to put a further £7m into Jaeger, which had a management reshuffle in September when it lost boss Colin Henry due to differing views over strategy.

The writedowns saw the 2012 fund’s net asset value (NAV) fall to £263.3m at the end of September from £354.1m in the prior year. NAV per share, including distributions, is now 77.71p, down from 98.06p.

Liberum’s analyst Connor Finn said: “CAV Aerospace is a concern as it would have been as a source of hope… The almost immediate writedown following the March 2015 acquisition will undoubtedly raise questions over the due diligence.”

Better Capital has enjoyed more success with the first fund it raised in 2009, which bought companies including Gardner Aerospace, Omnico and Santia. Despite another portfolio company, the luxury yacht maker Fairline, being sold for just £2m during the period, when it was valued at £13.5m in March, the runaway success of Gardner is set to pay for most of the return due to investors.

Overall the 2009 fund was valued at £264.2m at the end of September compared with £225.8m the previous year.

Better Capital’s chief executive and co-founder, Mark Aldridge, stepped down during the reporting period and was replaced by Simon Pilling, a former Capita executive.

City Link losers: Unsecured creditors

Trade (incl drivers) £30.7m

HMRC £5.0m

Accruals £2.7m

Customer rebates £0.4m

Customer bonds and employers pension contributions £0.1m

Source: EY