Ravensource Fund, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. Ravensource Fund’s (“Ravensource” or the “Fund”) net asset value (“NAV”) per unit increased by 11.9% over 2021, including distributions received by investors. As the fund invests in underfollowed and unloved opportunities, Ravensource’s investments can be particularly exposed to temporary market losses during flights to quality. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q4 2021 investor letter, Ravensource Fund mentioned Spanish Broadcasting System, Inc. (NYSE:SBSAA) and explained its insights for the company. Founded in 1983, Spanish Broadcasting System, Inc. (NYSE:SBSAA) is a Miami, Florida-based radio station operator with a $26.9 million market capitalization. Spanish Broadcasting System, Inc. (NYSE:SBSAA) delivered a -18.00% return since the beginning of the year, while its 12-month returns are up by 192.86%. The stock closed at $4.10 per share on April 14, 2022.
Here is what Ravensource Fund has to say about Spanish Broadcasting System, Inc. (NYSE:SBSAA) in its Q4 2021 investor letter:
“After years of unproductive negotiations, in February 2021 we entered into the Settlement Agreement with SBS whereby we largely exited the investment. Through the Settlement Agreement, 95.1% of the value we received was in cash with the rest being a small amount of newly issued common equity. While our exit triggered a 52.4% gain over 2021, our investment generated a disappointing 3.1% annualized return over its approximate 4-year life.
After a frustrating four years of attempting to negotiate a restructuring plan with the Company, the strong credit markets of early-2021 provided an offramp to our impasse. Rather than convert our preferred shares into common equity, the company raised a large amount of high yield debt and repaid us primarily in cash. While we still believed SBS’ enterprise value supported a recovery for the preferreds substantially above our cost, the path to realize on that value would continue to be uncertain. Between the costs, potential impact on the business and the fact that we had no sightline to a start date for a restructuring process, the Settlement Agreement was superior on a risk-adjusted basis.
Critical to our investment process is ensuring a high margin of safety. Although our return on SBS was mediocre, we were able to make the most of a difficult situation by receiving such a high- quality recovery that provided a positive overall return, due in large part to the significant discount at which we originally purchased the preferred shares.”
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Our calculations show that Spanish Broadcasting System, Inc. (NYSE:SBSAA) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Spanish Broadcasting System, Inc. (NYSE:SBSAA) delivered a -13.50% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
