CBOE Research Circular #RS16-556
Date:
August 2, 2016
To:
Permit Holders
From: Dinah Willis
RE:
Seventy Seven Energy Inc. (“SSEIQ”)
Contract Adjustment/Possible Broker to Broker Settlement
On July 14, 2016, the United States Bankruptcy Court for the District of Delaware confirmed the
Amended Joint Prepackaged Chapter 11 Plan of Reorganization (“Plan”) for Seventy Seven Energy
Inc. (“SSEIQ”). The Plan became effective on August 2, 2016, and SSEIQ was subsequently
suspended from trading before the open on August 2, 2016, Pursuant to the Plan, all
outstanding SSEIQ Equity Interests were cancelled and holders of equity interests did not receive or
retain any property under the Plan on account of such equity interests in Seventy Seven Energy, Inc.
As stated in the Plan, on or as soon as practicable after the effective date of the Plan, holders of
SSEIQ equity interests shall receive, in exchange for the surrender or cancellation of SSEIQ equity
interests, a distribution of 0.05004 New B Warrants plus 0.0556 of a New C Warrant per SSEIQ
Common Share, subject to confirmation. It is anticipated that fractional warrants will be dropped.
SSEIQ options will be adjusted to call for delivery of the (New) Series B Warrants and (New) Series
C Warrants, effective August 2, 2016. It is unknown at this time if the Warrants will be listed for
trading on any market and symbols for the Warrants are also unknown at this time. .Until such time
as the symbols and distribution ratios can be confirmed, the warrants deliverables for SSEI1 options
will be subject to delayed settlement. If a trading market has not developed after the final SSEI1
deliverable is determined, OCC may require broker-to-broker settlement for the warrants for SSEI1
option exercise and assignment activity.
Possible Settlement Procedures
An OTC or OTCBB (Bulletin Board) market may develop in the U.S. for the Seventy Seven Energy
Inc. (New) Series B Warrants and (New) Series C Warrants, although there is no assurance this will
happen. OCC anticipates that if an OTC or OTCBB market develops, NSCC will accept transactions
in the warrants which arise as a result of option exercise and assignment activity. In that event,
SSEI1 option exercise and assignment activity will settle in the normal fashion through NSCC.
However, if a market does not develop or NSCC does not accept transactions in the warrants, OCC
anticipates requiring broker to broker settlement for SSEI1 option exercise and assignment activity
after the final distribution is determined.
Pursuant to customary OCC broker to broker settlement procedures, inability to effect delivery may
subsequently occasion cash settlement as determined by OCC.
Contract Adjustments
Pursuant to Article VI, Section 11 and 11A, of OCC's By-Laws, all outstanding SSEIQ options were
adjusted as follows. On 8/2/2016 SSEIQ remains SSEIQ (with adjusted deliverable), and on
8/3/2016 SSEIQ changes to SSEI1. Premiums for the adjusted Seventy Seven Energy Inc. options
will continue to be calculated on the basis of a multiplier of 100, i.e., for premium and strike-price
extensions, 1.00 will equal $100. [Any FLEX series that may exist will be adjusted in a similar
manner to the standardized option.]
Delayed Settlement
OCC will delay settlement of the (New) Series B Warrants and (New) Series C Warrants
components of the SSEI1 deliverable until the final distribution ratio is confirmed. Upon confirmation
of the distribution ratios the Warrants, OCC will require will require Put exercisers and Call
assignees to deliver the appropriate number of Warrants.
A report will be available at the Help Desk listing the orders that are converted or canceled. If
converted, this list will also show how the new orders will be adjusted. This report will be available on
request anytime during the day prior to the night of the adjustment.
Questions regarding this memo can be addressed to Options Industry Services at 1-888-OPTIONS
(1-888-678-4667). CBOE contract adjustment memos can also be accessed from CBOE.com at the
following web address:
http://www.cboe.com/ContractAdjustments