Oppenheimer Holdings Inc S-4, filed Oct 9, 2020

Oppenheimer Holdings Inc (OPY)

S-4 2020-10-09

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Delaware	6211	98-0080034
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨	Smaller reporting company ¨
	Emerging growth company ¨

Title of each class of securities to be registered	Amount to be registered		Proposed maximum offering price per unit(1)			Proposed maximum aggregate offering price(1)		Amount of registration fee
5.50% Senior Secured Notes due 2025	$	125,000,000		100	%	$	125,000,000	$	13,637.50
Guarantees of 5.50% Senior Secured Notes due 2025		N/A		N/A			N/A		(2	)

Exact Name of Additional Registrant as Specified in its Charter*	State or other Jurisdiction of Incorporation or Organization	Primary Standard Industrial Classification Code Number		I.R.S. Employer Identification Number
E.A. Viner International Co.	Delaware		6211		76-0148280
Viner Finance Inc.	Delaware		6211		98-0100459

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS	i
SUMMARY		1
SUMMARY DESCRIPTION OF THE EXCHANGE OFFER		11
CONSEQUENCES OF NOT EXCHANGING OLD NOTES		15
SUMMARY DESCRIPTION OF THE NEW NOTES		16
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA		19
RISK FACTORS		21
USE OF PROCEEDS		50
THE EXCHANGE OFFER		51
DESCRIPTION OF THE NEW NOTES		58
BOOK-ENTRY DELIVERY AND FORM		117
U.S. FEDERAL INCOME TAX CONSIDERATIONS		120
CERTAIN ERISA CONSIDERATIONS		121
PLAN OF DISTRIBUTION		123
LEGAL MATTERS		124
EXPERTS		124
WHERE YOU CAN FIND MORE INFORMATION		125
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE		126

	·	changes in regulatory requirements that could affect the cost and method of doing business;

	·	general economic conditions, both domestic and international;

	·	competition from existing financial institutions, new entrants and other participants in the securities markets and financial services industry;

	·	potential cybersecurity threats;

	·	legal developments affecting the litigation and regulatory landscape of the securities industry and us;

	·	changes in foreign, federal and state tax laws that could affect the popularity of products sold by us or impose taxes on securities transactions or other tax obligations on us;

	·	the adoption and implementation of the Securities and Exchange Commission’s (the “SEC”) “Regulation Best Interest” and other regulations adopted in recent years;

	·	war, terrorist acts and nuclear confrontation as well as natural disasters;

	·	our ability to achieve our business plan;

	·	the effects of the economy on our ability to find and maintain financing options and liquidity;

	·	credit, operational, legal and regulatory risks;

	·	risks related to foreign operations, including those in the United Kingdom which may be affected by Britain’s January 2020 exit from the EU (“Brexit”);

	·	the effect of technological innovation on the financial services industry and securities business;

	·	risks related to election results, Congressional gridlock, political and social unrest, government shutdowns and investigations, trade wars, changes in or uncertainty surrounding regulation and threats of default by the Federal government;

	·	risks related to changes in capital requirements under international standards that may cause banks to back away from providing funding to the securities industry;

	·	risks related to the severity and duration of the COVID-19 Pandemic (as defined below); the pandemic’s impact on the U.S. and global economies; and Federal, state and local governmental responses to the pandemic; and

	·	the factors set forth under “Risk Factors” in this prospectus and other factors described in our filings with the SEC, including under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 (our “Second Quarter 10-Q”).

Old Notes	5.50% Senior Secured Notes due 2025, which were issued on September 22, 2020.
New Notes	5.50% Senior Secured Notes due 2025, the issuance of which has been registered under the Securities Act. The form and terms of the new notes are identical in all material respects to those of the old notes, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes.
Exchange Offer	We are offering to issue up to $125.0 million aggregate principal amount of the new notes in exchange for a like principal amount of the old notes to satisfy our obligations under the registration rights agreement that was executed when the old notes were issued in a transaction in reliance upon the exemption from registration provided by Rule 144A and Regulation S of the Securities Act.
Expiration Date; Tenders	The exchange offer will expire at 5:00 p.m., New York City time, on , 2020, unless extended in our sole and absolute discretion. By tendering your old notes, you represent to us that: ▪ you are not our “affiliate,” as defined in Rule 405 under the Securities Act; ▪ any new notes you receive in the exchange offer are being acquired by you in the ordinary course of your business; ▪ if you are not a participating broker dealer, you are not engaged in, and do not intend to engage in, the distribution of the new notes, as defined in the Securities Act; and ▪ if you are a broker-dealer that will receive new notes for your own account in exchange for old notes that were acquired by you as a result of your market-making or other trading activities, you will deliver a prospectus in connection with any resale of the new notes you receive. For further information regarding resales of the new notes by participating broker-dealers, see the discussion under the caption “Plan of Distribution.”
Withdrawal; Non-Acceptance	You may withdraw any old notes tendered in the exchange offer at any time prior to 5:00 p.m., New York City time, on , 2020. If we decide for any reason not to accept any old notes tendered for exchange, the old notes will be returned to the registered holder at our expense promptly after the expiration or termination of the exchange offer. In the case of the old notes tendered by book-entry transfer into the exchange agent’s account at The Depository Trust Company (“DTC”), any withdrawn or unaccepted old notes will be credited to the tendering holder’s account at DTC. For further information regarding the withdrawal of tendered old notes, see “The Exchange Offer — Terms of the Exchange Offer; Period for Tendering Old Notes” and the “The Exchange Offer — Withdrawal Rights.”

U.S. Federal Income Tax Considerations	The exchange of the old notes for new notes in the exchange offer will not be a taxable transaction for U.S. federal income tax purposes. See the discussion under the caption “U.S. Federal Income Tax Considerations” for more information regarding the tax considerations of the exchange offer.
Use of Proceeds	We will not receive any proceeds from the exchange offer.
Exchange Agent	The Bank of New York Mellon Trust Company, N.A. is the exchange agent for the exchange offer. You can find the address and telephone number of the exchange agent below under the caption “The Exchange Offer — Exchange Agent.”
Resales	Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to the third parties, we believe that the new notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act. However, you will not be able to freely transfer the new notes if: ▪ you are our “affiliate,” as defined in Rule 405 under the Securities Act; ▪ you are not acquiring the new notes in the exchange offer in the ordinary course of your business; ▪ you have an arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the new notes, you will receive in the exchange offer; ▪ you are holding old notes that have or are reasonably likely to have the status of an unsold allotment in the initial offering; or ▪ you are a participating broker-dealer that received new notes for its own account in the exchange offer in exchange for old notes that were acquired as a result of market-making or other trading activities. If you fall within one of the exceptions listed above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction involving the new notes. See the discussion below under the caption “The Exchange Offer — Procedures for Tendering Old Notes” for more information.

Issuer	Oppenheimer Holdings Inc.
Securities	Up to $125.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2025.
Maturity	October 1, 2025.
Interest	5.50% per annum, payable semi-annually in arrears on October 1 and April 1 of each year, beginning on April 1, 2021.
Subsidiary Guarantees	All payments on the new notes, including principal and interest, will be jointly and severally and fully and unconditionally guaranteed on a senior secured basis by E.A. Viner International Co. and Viner Finance Inc. and future subsidiaries required to guarantee the new notes pursuant to the “Future Subsidiary Guarantees” covenant (the “Subsidiary Guarantors”). See “Description of the New Notes — Covenants — Future subsidiary guarantees.”
	Most of our subsidiaries, including our broker-dealer subsidiaries, investment adviser subsidiaries and certain of our operating subsidiaries, which generate substantially all of our revenue and net income and own substantially all of our assets, will not be guarantors of the new notes.
	As of June 30, 2020, our non-guarantor subsidiaries represented 92.3% of our total assets and, for the six months ended June 30, 2020 and the year ended December 31, 2019, represented 100% and 100% of our total revenues, respectively. In addition, our non-guarantor subsidiaries generated net income of $26.9 million and $58 million for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively.
Collateral	The new notes and the subsidiary guarantees will be secured by a first priority security interest in substantially all of the Company’s and the Subsidiary Guarantors’ existing and future tangible and intangible assets, subject to certain exceptions and permitted liens. See “Description of the New Notes – Security.”
Optional Redemption	We may redeem the new notes at any time on or after October 1, 2022. The redemption price for the notes (expressed as a percentage of principal amount), will be as follows, plus accrued and unpaid interest and additional interest, if any, to, but not including, the redemption date:

If redeemed during the 12-month period commencing October 1, 2022	Redemption price
2022		102.750	%
2023		101.375	%
2024 and thereafter		100.000	%

	In addition, at any time prior to October 1, 2022, we may redeem the new notes at our option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the notes redeemed plus a “make-whole” premium and accrued and unpaid interest and additional interest, if any.
	In addition, at any time prior to October 1, 2022, we may redeem up to 35% of the principal amount of the new notes with the net cash proceeds of one or more sales of our capital stock (other than disqualified stock) at a redemption price of 105.50% of their principal amount, plus accrued and unpaid interest and additional interest, if any; provided that at least 65% of the original aggregate principal amount of new notes issued on the closing date remains outstanding after each such redemption and notice of any such redemption is sent within 90 days of each such sale of capital stock.
Change of Control	Upon a change of control we may be required to make an offer to purchase the new notes. The purchase price will equal 101% of the principal amount of the new notes on the date of purchase, plus accrued and unpaid interest and additional interest, if any. We may not have sufficient funds available at the time of a change of control to make any required debt payment (including repurchases of the new notes).
Ranking	The new notes will be our general senior obligations and will rank effectively senior in right of payment to all unsecured and unsubordinated obligations of the Company or the relevant Subsidiary Guarantor, to the extent of the value of the collateral owned by the Company or such Subsidiary Guarantor (and, to the extent of any unsecured remainder after payment of the value of the collateral, rank equally in right of payment with such unsecured and unsubordinated obligations of the Company). The new notes will also rank senior in right of payment to any subordinated debt of the Company or such Subsidiary Guarantor. The new notes will be secured on a first-priority basis by the collateral, subject to certain exceptions and permitted liens and it is intended that pari passu lien indebtedness, if any, will be secured on an equal and ratable basis. The new notes will be effectively junior in right of payment to all existing and future indebtedness, claims of holders of preferred stock and other liabilities (including trade payables) of subsidiaries of the Company that will not be guarantors, including all Regulated Subsidiaries (as defined below) and unrestricted subsidiaries.
	As of September 30, 2020, our long-term debt was comprised of the old notes.
	We currently derive the majority of our revenue from the operations of our Regulated Subsidiaries. As our obligations under the new notes will not be guaranteed by our Regulated Subsidiaries, creditors of a Regulated Subsidiary, including trade creditors, customers, and preferred stockholders, if any, of such Regulated Subsidiary generally will have priority with respect to the assets and earnings of such Regulated Subsidiary over the claims of the holders. The new notes, therefore, will be structurally subordinated to the claims of creditors, including trade creditors, customers and preferred stockholders, if any, of our Regulated Subsidiaries. As of June 30, 2020, our Regulated Subsidiaries had $1.7 billion outstanding in such liabilities.

	Six Months Ended June 30,					Year Ended December 31,
	2020			2019		2019		2018			2017
	(dollars in thousands)
Consolidated Statements of Operation:
REVENUE:
Commissions	$	204,885		$	160,305	$	320,114	$	329,668		$	336,620
Advisory fees		162,145			154,354		353,671		314,349			320,746
Investment banking		71,914			60,049		126,211		115,353			78,215
Bank Deposit sweep income		25,948			65,798		117,422		116,052			76,839
Interest		17,110			26,277		50,723		52,484			48,498
Principal transactions, net		11,196			14,483		30,094		14,461			23,273
Other		6,302			21,439		35,144		15,787			36,147
Total Revenue:		499,500			502,705		1,033,379		958,154			920,338
EXPENSES:
Compensation and related expenses		337,270			316,138		657,714		607,192			602,138
Communications and technology		41,215			40,585		81,588		74,479			71,978
Occupancy and equipment costs		31,412			30,846		62,198		61,171			61,164
Clearing and exchange fees		11,850			11,010		21,962		22,985			23,545
Interest		9,440			26,178		45,687		46,396			28,354
Other		34,826			44,505		89,318		101,062			113,607
Total expenses		466,013			469,262		958,467		913,285			900,786
Pre-tax income		33,487			33,443		74,912		44,869			19,552
Income tax expense (benefit)		8,020			9,874		21,959		15,977			(2,134	)
Net income		25,467			23,569		52,953		28,892			22,816

Net income	$	25,467		$	23,569	$	52,953	$	28,892		$	22,816
Other comprehensive income (loss), net of tax		–			–		–		–			–
Currency translation adjustment		(57	)		924		1,596		(1,417	)		2,263
Comprehensive income	$	25,410		$	24,493	$	54,549	$	27,475		$	25,079

	As of June 30,				As of December 31,
	2020		2019		2019		2018		2017
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	51,237	$	71,307	$	79,550	$	90,675	$	48,154
Total assets		2,364,317		2,652,416		2,464,755		2,240,314		2,438,517
Total liabilities		1,763,180		2,088,806		1,872,033		1,694,992		1,914,606
Total stockholders’ equity	$	601,137	$	563,610	$	592,722	$	545,322	$	523,911

	·	fluctuations in interest rates;

	As Adjusted*		Twelve months ended June 30,		Year Ended December 31,
	Twelve months ended June 30, 2020		2020		2019		2018		2017
	(dollars in thousands)
Other Financial Data
Consolidated Adjusted EBITDA⁽¹⁾⁽²⁾	$	101,992	$	101,992	$	103,468	$	71,672	$	52,913
Long-term Debt		125,000		148,574		150,000		200,000		200,000
Long-term Debt to Consolidated Adjusted EBITDA⁽²⁾		1.3		1.5		1.4		2.8		3.8

	Twelve months ended June 30,		Year Ended December 31,
	2020		2019		2018		2017
	(dollars in thousands)
Net Income Attributable to Oppenheimer Holdings Inc.	$	54,851	$	52,953	$	28,892	$	22,816
Add:
Interest Expense^(a)		10,607		12,319		13,500		13,740
Income Taxes		20,105		21,959		15,977		(2,134	)
Depreciation Expense		8,153		7,634		6,871		5,656
Amortization Expense		356		476		371		851
Consolidated EBITDA		94,072		95,341		65,611		40,930
Share-Based Compensation Expense^(b)		7,921		8,128		6,061		5,583
Extraordinary or Unusual Items^(c)		–		–		–		6,400
Consolidated Adjusted EBITDA	$	101,992	$	103,468	$	71,672	$	52,913

	(a)	Interest expense on long-term debt.
	(b)	Non-cash charges associated with restricted stock and stock option award programs.
	(c)	Includes charges related to value-added tax (VAT) assessment levied by the Israel VAT Authority in the amount of $6.4 million for the period August 2008 to March 31, 2017.

	·	sales methods and supervision;

	·	trading practices among broker-dealers;

	·	emerging standards concerning fees and charges imposed on clients for fee-based programs;

	·	use and safekeeping of customers’ funds and securities;

	·	anti-money laundering and the USA PATRIOT Act (the “Patriot Act”) compliance;

	·	capital structure of securities firms;

	·	trade and regulatory reporting;

	·	cybersecurity and data privacy;

	·	pricing of services;

	·	compliance with DOL (as defined below) rules and regulations for retirement accounts;

	·	compliance with lending practices (Regulation T);

	·	record keeping; and

	·	the conduct of directors, officers and employees.

	·	A portion of the Company's revenues are derived from fees generated from its asset management business segment. Asset management fees often are primarily comprised of base management and performance (or incentive) fees. Management fees are primarily based on assets under management. Assets under management balances are impacted by net inflow/outflow of client assets and changes in market values. Poor investment performance by the Company's funds and portfolio managers could result in a loss of managed accounts and could result in reputational damage that might make it more difficult to attract new investors and thus further impact the Company's business and financial condition. If the Company experiences losses of managed accounts, fee revenue will decline. In addition, in periods of declining market values, the values of assets under management may ultimately decline, which would negatively impact fee revenues.

	·	In the past decade, passively managed index funds have seen greater investor interest, and this trend has become more prevalent in recent years. This has led to a decline in the revenue the Company generates from commissions on the execution of trading transactions as turnover in client accounts diminishes. A continued lessening of investor interest in active investing and continued increase in passive investing may lead to a continued decline in the revenue the Company generates from commissions on the execution of trading transactions and, in respect of its market-making activities, a reduction in the value of its trading positions and commissions and spreads.

	·	Financial markets are susceptible to severe events such as dislocations which may lead to reduced liquidity. Under these extreme conditions, the Company’s risk management strategies may not be as effective as they might otherwise be under normal market conditions.

	·	Liquidity is essential to the Company’s businesses. The Company’s liquidity could be negatively affected by an inability to obtain funding on a regular basis either in the short-term market through bank borrowings or in the long-term market through senior and subordinated borrowings. Such illiquidity could arise through a lowering of the Company’s credit rating or through market disruptions unrelated to the Company. The availability of unsecured financing is largely dependent on our credit rating which is largely determined by factors such as the level and quality of our earnings, capital adequacy, risk management, asset quality and business mix. The Company has a limited amount of remaining auction rate securities to purchase from its clients which will reduce liquidity available to the Company for other purposes. The failure to secure the liquidity necessary for the Company to operate and grow could have a material adverse effect on the Company’s financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in our Second Quarter 10-Q.

	·	Changes in interest rates (especially if such changes are rapid), sustained low or high interest rates or uncertainty regarding the future direction of interest rates, may create a less favorable environment for certain of the Company’s businesses, particularly its fixed income business, resulting in reduced business volume and reduced revenue.

	·	other financial intermediaries as well as issuers whose securities we hold.

	·	executing securities trades that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries; and

	·	employees binding the Company to transactions that exceed authorized limits or present unacceptable risks to the Company (rogue trading);

	·	employee theft and improper use of Company or client property;

	·	employees conspiring with other employees or third parties to defraud the Company;

	·	employees hiding unauthorized or unsuccessful activities from the Company, including outside business activities that are undisclosed and may result in liability to the Company;

	·	employees steering or soliciting their clients into investments which have not been sponsored by the Company and without the proper diligence;

	·	employee conduct outside of acceptable norms including harassment; or

	·	certificates for old notes or a book-entry confirmation of a book-entry transfer of old notes into the Exchange Agent’s account at DTC, New York, New York as depository, including an agent’s message if the tendering holder does not deliver a letter of transmittal;

	·	a completed and signed letter of transmittal (or facsimile thereof), with any required signature guarantees, or an agent’s message in lieu of the letter of transmittal; and

	·	pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments;

	·	consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

	·	we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the notes or the incurrence of the guarantees;