Contract analysis

I. INTRODUCTION AND PURPOSE OF DECLARATION

1. My name is Marcus Hale. I am 48 years old. I serve as President of Thalassa Americas Inc. ("TAI" or the "Debtor"), a Delaware C-Corporation and wholly owned subsidiary of Thalassa Shipping & Logistics Société Anonyme ("TSL" or "Thalassa"), a société anonyme organized under the laws of the Hellenic Republic. I am authorized to submit this declaration on behalf of the Debtor.

2. I have served as President of TAI since April 2018. Prior to joining TAI, I held senior operational positions in the shipping and logistics industry for over twenty years, including serving as Senior Vice President of Operations at Gulf Maritime Holdings LLC from 2012 to 2018 and as Director of Terminal Operations at TransGlobal Ports Inc. from 2007 to 2012. Through these roles and my tenure at TAI, I have develop

3. I submit this declaration (the "Declaration") in support of the Debtor's voluntary petition for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), and in support of all first-day motions and applications filed contemporaneously herewith (collectively, the "First-Day Motions"). Specifically, this Declaration is submitted in support of the following First-Da

4. Except as otherwise indicated, the facts set forth in this Declaration are based on my personal knowledge, my review of relevant documents and business records of TAI and TSL, and information I have received from other officers and employees of TAI and TSL, as well as from the Debtor's legal and financial advisors. If called as a witness, I could and would testify competently to the facts set forth herein. Where s

5. The Debtor's proposed counsel in this chapter 11 case is Calderwood & Harkness LLP ("C&H"), located at 780 Third Avenue, New York, New York 10017, with Nathaniel Bower serving as the responsible partner for this engagement. C&H was engaged by the Debtor and its parent company on October 25, 2022, to advise on chapter 11 contingency planning, out-of-court restructuring alternatives, cross-border coordination with G

6. The Debtor's financial advisor is Kensington Veltrian Partners LLC ("KHP"), located at 300 Park Avenue, 12th Floor, New York, New York 10022. James Calloway, Managing Director, leads the KHP team advising the Debtor and its parent. KHP has been instrumental in developing the Debtor's financial projections, DIP financing budget, and valuation analyses that have informed the restructuring process.

7. This Declaration is organized as follows: Part II provides an overview of the Thalassa enterprise and the Debtor's corporate background and business operations. Part III describes the Debtor's capital structure. Part IV sets forth the events leading to this chapter 11 filing. Part V describes the Debtor's restructuring objectives. Part VI summarizes the proposed key milestones for the chapter 11 case. Part VII des

II. CORPORATE BACKGROUND AND BUSINESS OVERVIEW A. The Thalassa Enterprise

8. TSL is a société anonyme organized under the laws of the Hellenic Republic (Greece), registered with the Athens General Commercial Registry, and headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. TSL was founded in 1987 by the Kostandinos family and has grown over more than three decades into a leading international shipping and logistics enterprise with global operations.

9. TSL is now led by Dimitrios Kostandinos, who serves as Chairman of the Board (age 71), and his daughter, Elena Kostandinos-Pavlou, who serves as Vice Chairwoman of the Board (age 44). The Kostandinos family holds a combined 80% equity interest in TSL through KFO Holdings Société Anonyme ("KFO"), a Greek société anonyme registered at the same address as TSL. Specifically, Mr. Kostandinos holds a 62% equity interest

10. TSL's executive management team includes the following individuals: (a) Georgios Andreadis (age 56), Chief Executive Officer, who has served in that capacity since 2015 and oversees the day-to-day operations of the TSL enterprise globally; (b) Irini Dalakoura (age 49), Chief Financial Officer, who has served in that capacity since 2017 and is responsible for TSL's financial reporting, treasury operations, and cap

11. TSL owns and operates a fleet of fifty (50) vessels, comprising thirty-eight (38) dry-bulk carriers and twelve (12) container vessels. The dry-bulk fleet is composed of ten (10) Capesize vessels, fourteen (14) Panamax vessels, and fourteen (14) Supramax vessels. The container vessel fleet consists of twelve (12) Sub-Panamax units. The vessels are registered under various flag states and are held through a network

12. TSL provides integrated port-to-door logistics services across a range of trade lanes, with a particular focus on the Mediterranean, Black Sea, and transatlantic routes. The enterprise's operations encompass vessel chartering, cargo transportation, terminal management, and landside logistics coordination. TSL operates terminal facilities at three key locations: Piraeus (Greece), Thessaloniki (Greece), and Houston

13. As of the date of this Declaration, the Thalassa enterprise employs approximately 4,200 people globally, including shore-based employees at corporate offices and terminal facilities, as well as seafarers serving aboard TSL's fleet. B. Thalassa Americas Inc. — The Debtor

14. Thalassa Americas Inc. ("TAI" or the "Debtor") is a C-Corporation organized under the laws of the State of Delaware. TAI is a wholly owned subsidiary of TSL. TAI's registered agent in Delaware is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. TAI's Employer Identification Number is 84-3291057.

15. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. It is from this location that TAI conducts the majority of its business operations, including the management of the Houston terminal, vessel scheduling, and domestic freight brokerage activities.

16. TAI's primary business operations consist of three principal activities: (a) Houston Terminal Operations. TAI operates and manages TSL's terminal facility at the Port of Houston, which handles the loading, unloading, and transshipment of dry-bulk and containerized cargo for TSL's transatlantic trade lane. The Houston terminal is a critical component of the Thalassa enterprise's operations in the Western Hemispher

17. TAI's officers are as follows: (a) Marcus Hale, President (the declarant herein); (b) Diana Restrepo (age 41), Vice President of Finance, who oversees TAI's financial operations, including accounting, budgeting, and financial reporting to TSL's corporate finance function; and (c) Jonathan Kurtz (age 45), Vice President of Operations, who manages the day-to-day operations of the Houston terminal and coordinates TA

18. TAI employs approximately 680 people in the United States. These employees include terminal operators, logistics coordinators, freight brokers, administrative staff, and management personnel. The workforce is essential to TAI's continued operations, and the Debtor's ability to retain its employees is a critical component of its restructuring strategy, as discussed further below.

19. TAI generated revenue of approximately $312 million in fiscal year 2021. However, reflecting the severe downturn in the global shipping markets discussed further in Part IV below, TAI's revenue declined to an estimated $198 million in fiscal year 2022 — a decrease of approximately 36.5%. This revenue decline has placed enormous financial strain on TAI and has been a principal factor in the circumstances giving ri

20. TAI is a co-borrower on the U.S. Tranche (Term Loan B or "TLB") of the Senior Secured Credit Facility described in Part III below. The TLB has an outstanding principal balance of $85 million as of September 30, 2022. In addition, TAI owes its parent, TSL, $76.4 million under a subordinated intercompany promissory note bearing interest at a rate of 5.0% per annum. The intercompany note is subordinated to all of th

21. TSL's consolidated financial results reflect the magnitude of the market downturn that has affected the global shipping industry. For fiscal year 2021, TSL reported consolidated revenue of approximately €1.42 billion. For fiscal year 2022, TSL's consolidated revenue is estimated at approximately €987 million, representing a decline of approximately 30.5% year-over-year. This revenue compression was driven primari

22. As of September 30, 2022, TSL's total consolidated indebtedness was approximately $847.3 million, which includes the Senior Secured Credit Facility, Mezzanine Notes, Unsecured Notes, the intercompany note payable by TAI to TSL, trade payables, and other liabilities. A detailed breakdown of this indebtedness is provided in Part III below.

23. TSL's last twelve months ("LTM") EBITDA as of September 30, 2022 was approximately $98.6 million. LTM interest expense for the same period was approximately $56.7 million. These figures reflect the significant deterioration in TSL's earnings capacity relative to its debt service obligations, which has been a central driver of the financial distress described herein.

24. TSL's independent auditors are Grainger, Holt & Associates LLP, a firm based in London, United Kingdom. Malcolm Holt serves as the lead engagement partner. Grainger, Holt & Associates has audited TSL's consolidated financial statements for the past four fiscal years.

III. THE DEBTOR'S CAPITAL STRUCTURE

25. The following is a summary of the Debtor's and TSL's capital structure as of September 30, 2022. A more detailed summary of the prepetition debt instruments is attached hereto as Exhibit B. A. Senior Secured Credit Facility

26. On June 15, 2019, TSL (as borrower) and TAI (as co-borrower on the U.S. Tranche) entered into a Senior Secured Credit Agreement (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement") with Nordbank International AG, as administrative agent and collateral agent (in such capacities, the "Agent"), and a syndicate of nine (9) lenders (collectively, the "Senior Secured Len

27. The Credit Agreement provides for a total commitment of $685 million, allocated among the following facilities: (a) Term Loan A ("TLA"): Original principal amount of $400 million, amortizing quarterly at $10 million per quarter. As of September 30, 2022, thirteen (13) quarterly amortization payments had been made (from the third quarter of 2019 through the third quarter of 2022), for a total of $130 million in pr

28. As of September 30, 2022, the total outstanding principal under the Credit Agreement was $540 million, calculated as follows: $270 million (TLA) + $185 million (RCF) + $85 million (TLB) = $540 million.

29. Interest on all tranches of the Credit Agreement accrues at a rate of SOFR plus 375 basis points per annum. Upon the occurrence and during the continuance of an event of default, the applicable interest rate increases by an additional 200 basis points (the "default rate"), resulting in a total rate of SOFR plus 575 basis points. As discussed in Part IV below, events of default occurred in September 2022, and defa

30. All obligations under the Credit Agreement mature on June 15, 2024. The TLA has a CUSIP number of 87265BAA7.

31. The Senior Secured Lenders and their respective commitments under the Credit Agreement are as follows:

32. The obligations under the Credit Agreement are secured by first-priority liens on substantially all of the assets of TSL and its subsidiaries, including: (a) all thirty-eight (38) dry-bulk carriers and twelve (12) container vessels in the fleet; (b) the Houston terminal lease; (c) all accounts receivable of TSL and its subsidiaries; and (d) the equity interests in TAI and fourteen (14) vessel-owning SPVs. The col

33. On June 15, 2019, concurrently with the execution of the Credit Agreement, TSL issued mezzanine notes (the "Mezzanine Notes") to Dralvecen Mezzanine Capital LLC ("BMC"), located at 600 Lexington Avenue, 22nd Floor, New York, New York 10022. Rebecca Marsh, Senior Partner at BMC, serves as the primary contact for this investment.

34. The Mezzanine Notes had an original principal amount of $100 million. Interest on the Mezzanine Notes accrues at a rate of 11.5% per annum on a payment-in-kind ("PIK") toggle basis. Beginning in the second quarter of 2022, all interest has been paid in kind by capitalizing accrued interest into the outstanding principal balance. As of September 30, 2022, the outstanding principal balance of the Mezzanine Notes wa

35. The Mezzanine Notes mature on December 15, 2024. The obligations under the Mezzanine Notes are secured by second-priority liens on the same collateral that secures the Senior Secured Credit Facility. The relative rights and priorities of the first-lien and second-lien creditors are governed by an Intercreditor Agreement dated June 15, 2019, between Nordbank International AG (as first-lien agent) and BMC.

36. BMC is represented by Kellner & Foss LLP, located at 1185 Avenue of the Americas, 30th Floor, New York, New York 10036. Theodore Kellner serves as the lead partner on this engagement. C. Unsecured Notes

37. On March 1, 2020, TSL issued $50 million in aggregate principal amount of unsecured notes (the "Unsecured Notes") pursuant to an indenture (the "Indenture") between TSL, as issuer, and Garrison Trust Company, as indenture trustee (the "Indenture Trustee"). The Indenture Trustee is located at 100 Wall Street, 16th Floor, New York, New York 10005. The Unsecured Notes bear a CUSIP number of 87265BAB5.

38. The Unsecured Notes bear interest at a rate of 8.25% per annum, payable in cash semi-annually on June 1 and December 1 of each year. The Unsecured Notes mature on March 1, 2025. The Unsecured Notes are unsecured obligations of TSL and rank pari passu with all other unsecured and unsubordinated indebtedness of TSL.

39. As discussed in greater detail in Part IV below, TSL missed the December 1, 2022 semi-annual interest payment on the Unsecured Notes. The missed payment totaled $2,062,500, calculated as $50,000,000 × 8.25% ÷ 2. The Indenture provides for a thirty (30)-day cure period following a missed interest payment. That cure period expired on January 1, 2023, and the missed payment now constitutes an event of default under

40. An informal group of holders of the Unsecured Notes (the "Unsecured Noteholder Group") has been organized and is represented by Ashford, Brightmoor Group & McKay PC, located at 299 Park Avenue, 18th Floor, New York, New York 10171. Carolyn Brightmoor Group serves as the lead partner representing the Unsecured Noteholder Group. D. Trade Creditors

41. As of September 30, 2022, TAI had approximately $38.7 million in outstanding trade payables. These payables are owed to a diverse group of vendors and service providers that support TAI's operations, including bunker fuel suppliers, port service providers, ship maintenance and repair companies, logistics service providers, and various other vendors.

42. The largest single trade creditor is Olympian Fuel & Supply SA ("Olympian"), a bunker fuel supplier headquartered in Piraeus, Greece. As of September 30, 2022, TAI owed Olympian approximately $9.2 million for bunker fuel deliveries. Olympian is a critical supplier to TAI's operations, as bunker fuel is essential to the operation of TSL's fleet and the continued performance of voyage charters. A list of the Debtor

43. TAI owes its parent, TSL, $76.4 million under a subordinated intercompany promissory note (the "Intercompany Note"). The Intercompany Note bears interest at a rate of 5.0% per annum. The Intercompany Note is subordinated to all of TAI's obligations under the Senior Secured Credit Facility and the Mezzanine Notes. The Intercompany Note arose from historical intercompany funding transactions in which TSL advanced c

44. As of September 30, 2022, the total consolidated indebtedness of TSL and its subsidiaries (including TAI) was approximately $847.3 million, broken down as follows:

IV. EVENTS LEADING TO THE CHAPTER 11 FILING A. Market Deterioration

45. The global dry-bulk shipping market experienced a severe and sustained downturn during 2022. The Baltic Dry Index (the "BDI"), which is the principal benchmark for dry-bulk freight rates and is published daily by the Baltic Exchange in London, declined approximately 58% between January 2022 and September 2022. The BDI reflects the cost of transporting raw materials such as coal, iron ore, and grain by sea, and it

46. The decline in the BDI directly impacted TSL's earnings. TSL's average daily time-charter equivalent ("TCE") rate — the standard measure of revenue per vessel per day — fell from $24,800 per day (the fiscal year 2021 average) to $11,200 per day (the third quarter of 2022 average). This represents a decline of approximately 54.8% and reflects the severity of the freight rate collapse.

47. The collapsing dry-bulk charter rates caused severe revenue compression for both TSL and TAI. TSL's consolidated revenue declined from approximately €1.42 billion in fiscal year 2021 to an estimated €987 million in fiscal year 2022, a decline of approximately 30.5%. TAI's revenue declined from approximately $312 million in fiscal year 2021 to an estimated $198 million in fiscal year 2022, a decline of approximate

48. In addition to the impact on revenue, the market downturn caused significant impairments to the value of TSL's fleet. In January 2022, the fleet was appraised by Drakos Maritime Valuations Ltd. ("Drakos"), an independent maritime appraisal firm located at 28 Poseidonos Avenue, Piraeus 18531, Greece, at an aggregate value of $891 million. Captain Nikos Drakos, Managing Director of Drakos, oversaw the appraisal. As

49. The fleet value decline is significant because the vessels constitute the primary collateral securing the Senior Secured Credit Facility and the Mezzanine Notes. As discussed below, the decline in fleet values has narrowed the equity cushion available to the secured creditors and has been a material factor in negotiations with the Debtor's lender groups. B. Covenant Breaches

50. The deterioration in TSL's and TAI's financial performance, combined with the decline in fleet values, resulted in breaches of multiple financial covenants contained in the Credit Agreement. Specifically: (a) Minimum Liquidity Covenant. The Credit Agreement requires that TSL and its subsidiaries maintain a minimum of $40 million in unrestricted cash and cash equivalents at all times (the "Minimum Liquidity Covena

51. Each of the foregoing covenant breaches constituted an event of default under the Credit Agreement, entitling the Senior Secured Lenders to exercise their remedies under the Credit Agreement, including acceleration of the outstanding indebtedness and enforcement of their liens on the collateral. The severity of these breaches — particularly the leverage ratio breach, which exceeded the covenant maximum by more th

52. Following the occurrence of the events of default described above, the Debtor and TSL immediately engaged in negotiations with the Senior Secured Lender syndicate, through Nordbank as Agent, to obtain a forbearance from the exercise of default remedies.

53. On October 10, 2022, TSL, TAI, and the Senior Secured Lender syndicate (through Nordbank as Agent) executed a Forbearance Agreement (the "Forbearance Agreement") pursuant to which the Senior Secured Lenders agreed to a ninety (90)-day standstill period through January 8, 2023. During the standstill period, the Senior Secured Lenders agreed to refrain from exercising their default remedies under the Credit Agreeme

54. The Forbearance Agreement was subsequently extended twice: first, by an amendment executed on January 8, 2023, which extended the standstill period to March 8, 2023; and second, by an amendment executed on March 8, 2023, which extended the standstill period to April 7, 2023. Each extension was negotiated in connection with the ongoing restructuring discussions described below and was conditioned upon TSL's and TA

55. Importantly, during the forbearance period, the Credit Agreement's default interest provision remained in effect. Accordingly, interest on the outstanding principal under the Credit Agreement has been accruing at the default rate of SOFR plus 575 basis points (consisting of the base rate of SOFR plus 375 basis points, plus the 200 basis point default rate increase) since the events of default occurred in Septembe

56. In August 2022, in anticipation of the financial distress that was becoming apparent, an informal ad hoc group of certain Senior Secured Lenders (the "Ad Hoc Group") was formed. The Ad Hoc Group comprises four of the nine Senior Secured Lenders: Nordbank International AG ($137 million commitment), Harborstone Bank plc ($95 million commitment), Triton Credit Partners LP ($68 million commitment), and Continental Ma