Contract analysis

1. Thalassa Americas Inc. ("TAI" or the "Debtor"), a Delaware C-corporation and wholly-owned subsidiary of Thalassa Shipping & Logistics Société Anonyme ("TSL"), a Greek société anonyme, respectfully moves this Court for entry of interim and final orders authorizing, but not directing, the Debtor to pay certain prepetition claims of Critical Vendors in an aggregate amount not to exceed $__ million (the "Critical Vend

2. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI's registered agent in the State of Delaware is Capitol Registered Agents LLC, 1209 Orange Street, Wilmington, Delaware 19801. TAI's Employer Identification Number is 84-3291057.

3. TAI operates the United States-side operations of the TSL shipping and logistics conglomerate, including Houston terminal operations, Jones Act–exempt foreign-flag vessel scheduling, and domestic freight brokerage. TAI generated estimated revenues of approximately $198 million for the fiscal year ending December 31, 2022 ("FY2022"), and employs approximately 680 people in the United States across its Houston termi

4. The Debtor's business depends on the continued, uninterrupted supply of goods and services from a limited number of Critical Vendors who provide essential bunker fuel, marine supplies, vessel maintenance services, terminal services, freight brokerage support, and logistics support. Without the continued and uninterrupted supply of such goods and services, the Debtor's operations would cease or be materially impair

5. As of the anticipated petition date (the "Petition Date"), the Debtor estimates that its total outstanding trade payables are approximately $38.7 million. The Debtor does not seek authority to pay all prepetition trade claims. Rather, the Debtor seeks authority to pay only those prepetition claims of Critical Vendors whose continued supply is essential to the preservation of the Debtor's estate and going-concern v

6. The relief requested herein is supported by the "necessity of payment" doctrine (also known as the "doctrine of necessity"), which is codified in and authorized by Section 105(a) of the Bankruptcy Code, and by Section 363(b) of the Bankruptcy Code, and is consistent with the practices of this Court and courts within the Fifth Circuit. The doctrine recognizes that in certain circumstances, the payment of prepetitio

7. This Motion is supported by the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), filed concurrently herewith and incorporated herein by reference.

8. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the Southern District of Texas, dated October 16, 2012. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2), and the Debtor confirms its consent, pursuant to Bankruptcy Rule 7008, to the entry of a final order or judgment by this Court if i

9. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409, as the Debtor's principal place of business has been located in Houston, Texas, within the Southern District of Texas, for the 180-day period immediately preceding the commencement of this case.

10. The statutory predicates for the relief requested herein are Sections 105(a), 363(b), and 503(b)(9) of the Bankruptcy Code, as well as Bankruptcy Rules 6003 and 6004.

III. BACKGROUND A. General Corporate Background

11. TSL was founded in 1987 by the Kostandinos family and is headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. TSL is one of the largest privately held shipping and logistics enterprises in the eastern Mediterranean region, providing integrated port-to-door logistics services across the Mediterranean, Black Sea, and transatlantic trade lanes. TSL owns and operates a fleet of fifty (50) vessels: thirty-eight (3

12. TAI is the wholly-owned U.S. subsidiary of TSL, organized and existing as a C-corporation under the laws of the State of Delaware. TAI's certificate of incorporation was filed with the Delaware Secretary of State on March 12, 2012. TAI conducts the U.S.-side operations of the TSL enterprise, including: (a) Houston terminal operations at the Debtor's dedicated terminal facility located within the Port of Houston c

13. TAI's current officers are as follows: (a) Marcus Hale, President; (b) Diana Restrepo, Vice President of Finance; and (c) Jonathan Kurtz, Vice President of Operations.

14. TSL's equity is held as follows: sixty-two percent (62%) by Dimitrios Kostandinos, Chairman of the Board of Directors of TSL, and eighteen percent (18%) by Elena Kostandinos-Pavlou, Vice Chairwoman of the Board of Directors of TSL, in each case through KFO Holdings Société Anonyme, a Greek holding company, for a combined Kostandinos family ownership stake of eighty percent (80%). The remaining twenty percent (20%

15. The following is a summary of the material components of the Debtor's and TSL's capital structure as of September 30, 2022, the most recent date for which complete financial information is available. (i) Senior Secured Credit Facility.

16. TSL (as primary borrower) and TAI (as co-borrower with respect to the U.S. Tranche Term Loan B described below) are parties to that certain Senior Secured Credit Agreement, originally dated as of June 15, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senior Credit Agreement"), among TSL, TAI, Nordbank International AG, as Administrative Agent and Collateral Agent (in such

17. As of September 30, 2022, the aggregate outstanding principal amount under the Senior Credit Agreement was $540 million (comprising $270 million under TLA, $185 million under the Revolver, and $85 million under TLB). Interest accrues at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 375 basis points, with a default rate of an additional 200 basis points applicable upon the occurrence and durin

18. Obligations under the Senior Credit Agreement are secured by first-priority liens and security interests in substantially all assets of TSL and its subsidiaries, including: (a) all fifty (50) vessels owned by TSL's vessel-owning special purpose vehicles; (b) the Houston terminal lease and related leasehold improvements; (c) all accounts receivable of TSL and its subsidiaries (including TAI); and (d) the equity in

19. The syndicate of Senior Secured Lenders under the Senior Credit Agreement, and their respective approximate commitments as of September 30, 2022, are as follows: (ii) Mezzanine Notes.

20. TSL is the issuer of certain subordinated mezzanine notes (the "Mezzanine Notes") held by Dralvecen Mezzanine Capital LLC ("BMC"), with an outstanding principal balance of $112.3 million as of September 30, 2022. The Mezzanine Notes were originally issued in the principal amount of $100 million, with $12.3 million of payment-in-kind ("PIK") capitalized interest accrued as of September 30, 2022. The Mezzanine Note

21. TSL is the issuer of $50 million in aggregate principal amount of 8.25% Senior Unsecured Notes due March 1, 2025 (the "Unsecured Notes," and together with the Senior Credit Agreement and the Mezzanine Notes, the "Funded Debt"). The Unsecured Notes bear interest at a fixed rate of 8.25% per annum, payable semi-annually in cash on March 1 and September 1 of each year. The CUSIP number for the Unsecured Notes is 872

22. TAI is the obligor under a subordinated intercompany promissory note (the "Intercompany Note") in the principal amount of $76.4 million payable to TSL. The Intercompany Note bears interest at a rate of 5.0% per annum. The Intercompany Note is subordinated in right of payment to all other indebtedness of TAI, including the Senior Credit Agreement and the Mezzanine Notes. (v) Trade Payables.

23. As of September 30, 2022, TAI's outstanding trade payables were approximately $38.7 million, owed to a diverse group of vendors and service providers across the categories described more fully in Section VI below. (vi) Total Debt Summary.

24. The following table summarizes the Debtor's and TSL's aggregate indebtedness as of September 30, 2022: C. Events Leading to This Case

25. The global shipping industry has experienced a severe downturn in dry-bulk freight rates during 2022. The Baltic Dry Index ("BDI"), a widely followed benchmark for the cost of shipping commodities by sea, declined approximately 58% between January 2022 and September 2022, reflecting weakened global demand for raw materials, reduced Chinese steel production, and excess vessel tonnage entering the market. This prec

26. TSL's average daily time-charter equivalent ("TCE") rate — a key measure of vessel earnings — fell from $24,800 per day (FY2021 average) to $11,200 per day (Q3 2022 average), representing a decline of approximately 54.8%. This decline has resulted in corresponding decreases in both TSL's consolidated revenue and TAI's U.S. revenue.

27. Fleet asset values have also deteriorated significantly. According to an independent appraisal performed by Drakos Maritime Valuations Ltd., a respected London-based ship valuation firm, the aggregate fair market value of TSL's fifty-vessel fleet declined from $891 million as of January 2022 to $623 million as of November 1, 2022, a decline of $268 million, or approximately 30.1%. The decline in vessel values has

28. TSL's consolidated revenue declined approximately 30.5%, from €1.42 billion in FY2021 to an estimated €987 million in FY2022. TAI's revenue declined from $312 million in FY2021 to an estimated $198 million in FY2022, a decline of approximately 36.5%.

29. As a direct consequence of these market conditions, TSL breached multiple financial covenants under the Senior Credit Agreement during the third and fourth quarters of 2022: (a) Minimum Liquidity Covenant Breach (September 15, 2022). The Senior Credit Agreement requires TSL to maintain a minimum of $40 million in unrestricted cash and cash equivalents at all times (the "Minimum Liquidity Covenant"). On September

30. On October 10, 2022, TSL, TAI, and the Senior Secured Lenders executed a Forbearance Agreement (the "Forbearance Agreement"), pursuant to which the Senior Secured Lenders agreed to a ninety (90)-day standstill with respect to the exercise of remedies arising from the foregoing covenant defaults, running through January 8, 2023. The Forbearance Agreement was subsequently extended on two occasions: first, to March

31. On December 1, 2022, TSL failed to make the semi-annual interest payment of $2,062,500 on the Unsecured Notes ($50 million × 8.25% ÷ 2 = $2,062,500) that was due on that date. The Unsecured Indenture provides for a thirty (30)-day cure period following a missed interest payment, which expired on January 1, 2023, without payment having been made. This missed payment constitutes an event of default under the Unsecu

32. In connection with the Debtor's restructuring efforts, Kensington Veltrian Partners LLC ("KHP"), the Debtor's financial advisor, has estimated the enterprise value of TSL and its subsidiaries (including TAI) at between $580 million and $640 million (midpoint: $610 million). This enterprise value estimate, which was prepared as of December 2022 using a combination of discounted cash flow, comparable company, and c

33. Notwithstanding the Debtor's ongoing pursuit of an out-of-court restructuring — including active negotiations with the Ad Hoc Group of Senior Secured Lenders, BMC, and the informal group of unsecured noteholders — this Chapter 11 filing has been prepared on a contingency basis to preserve all options available to the Debtor and its stakeholders. On December 15, 2022, the Debtor received a term sheet from Nordbank

34. The Debtor relies on a network of specialized maritime suppliers, fuel providers, terminal service providers, vessel maintenance contractors, freight brokers, and logistics partners to conduct its day-to-day operations. The maritime industry is characterized by a high degree of specialization and geographic concentration, and many of the vendors upon which the Debtor depends are not readily replaceable.

35. Many of these vendors are sole-source or limited-source providers due to the highly specialized nature of marine operations, geographic constraints at and around the Port of Houston, regulatory requirements for foreign-flag vessel servicing, and the Debtor's specific operational requirements. In many instances, the Debtor's relationships with these vendors have been developed over years of cooperative dealings, a

36. The Debtor's largest trade creditor is Olympian Fuel & Supply SA ("Olympian F&S"), a bunker fuel supplier headquartered at 7 Iroon Polytechniou, Piraeus 18535, Greece, which is owed approximately $9.2 million as of the Petition Date. Olympian F&S has been the Debtor's primary bunker fuel provider since 2014 and is one of the few suppliers capable of meeting the Debtor's fueling requirements at Mediterranean and t

37. Without continued supply from these Critical Vendors, the Debtor's Houston terminal operations, vessel scheduling, and freight brokerage business would be materially disrupted, causing irreparable harm to the estate, the Debtor's approximately 680 employees, the Debtor's ability to generate revenue, and the Debtor's prospects for a successful reorganization. The cessation of bunker fuel supply alone would result

38. By this Motion, the Debtor requests entry of the Interim Order and the Final Order authorizing, but not directing, the Debtor to pay the prepetition claims of Critical Vendors in an aggregate amount not to exceed $__ million (the "Critical Vendor Cap"), subject to the terms and conditions set forth herein and in the proposed Orders.

39. The Debtor seeks authority to pay such claims in the ordinary course of business, provided that each Critical Vendor whose prepetition claims are paid agrees to continue supplying goods and services to the Debtor on terms at least as favorable to the Debtor as those in effect during the twelve (12)-month period prior to the Petition Date (the "Customary Trade Terms"), including with respect to pricing, payment te

40. The Debtor further requests that, as a condition of payment, each Critical Vendor be required to execute a trade agreement (a "Critical Vendor Agreement") or otherwise provide written confirmation of its agreement to continue supply on Customary Trade Terms for the duration of the Chapter 11 case. The form of Critical Vendor Agreement will be provided to the U.S. Trustee and any official committee of unsecured cr

41. In the event a Critical Vendor accepts payment of its prepetition claim under the authority of this Motion and the Orders entered hereon and thereafter refuses to continue supplying the Debtor on Customary Trade Terms, the Debtor requests authority to: (a) recover such payment from the non-complying Critical Vendor; or (b) treat the payment as a postpetition advance, thereby giving rise to an administrative expen

42. The Debtor also requests that the Court authorize the Debtor's banks and financial institutions to receive, process, honor, and pay all checks, wire transfers, electronic fund transfers, and other payment instructions made by the Debtor consistent with the Orders entered on this Motion, and that such banks and financial institutions be entitled to rely on the representations of the Debtor as to which payments are

V. BASIS FOR RELIEF A. The Necessity of Payment Doctrine — 11 U.S.C. § 105(a)

43. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This broad grant of equitable authority has long been interpreted to empower bankruptcy courts to authorize the payment of certain prepetition claims where such payment is essential to the continued operation of

44. The "necessity of payment" doctrine — also referred to as the "doctrine of necessity" — permits a debtor in possession to pay certain prepetition claims where failure to do so would cause the debtor's business to collapse or suffer disproportionate harm, to the detriment of all creditors and parties in interest. The doctrine finds its origins in the railroad receivership cases of the nineteenth century, where cou

45. The doctrine has been consistently applied by courts in the Fifth Circuit and by this Court. Courts applying the doctrine have identified the following factors as relevant to the determination of whether prepetition payment is warranted: (a) Whether the vendor provides goods or services that are essential to the debtor's ongoing operations and the preservation of going-concern value; (b) Whether the vendor is a s

46. The Debtor respectfully submits that each of these factors weighs in favor of the relief requested herein. As described more fully in Section VI below, the Critical Vendors identified by the Debtor provide goods and services that are indispensable to the Debtor's Houston terminal operations, vessel scheduling, and freight brokerage business. Many of these vendors are sole-source or limited-source providers, and t

47. Payment of Critical Vendor claims is not merely for the benefit of the Critical Vendors themselves. Rather, such payment is necessary to preserve the Debtor's ability to operate as a going concern, thereby maximizing the value of the estate for the benefit of all creditors — secured, priority, and general unsecured alike. The alternative — cessation of supply from Critical Vendors — would result in the grounding

48. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1). Courts have routinely authorized payments to critical vendors under Section 363(b) where the debtor demonstrates a sound business justification for such payments. See In re Ionosphere Clubs, Inc.,

49. The business judgment standard applies to requests under Section 363(b). Under this standard, a court should approve a debtor's proposed use of estate property so long as the debtor has articulated a sound business justification and the proposed action is not the product of bad faith. In re Continental Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir. 1986).

50. The Debtor submits that a sound business justification exists for the payments sought herein. Specifically: (a) The continued operation of the Debtor's Houston terminal and vessel scheduling operations depends on the uninterrupted supply of bunker fuel, marine supplies, terminal services, vessel maintenance, and logistics support from the Critical Vendors. (b) The loss of critical supply chains would imperil the

51. Section 503(b)(9) of the Bankruptcy Code provides for allowance as an administrative expense the "value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor's business." 11 U.S.C. § 503(b)(9).

52. A portion of the prepetition claims of certain Critical Vendors may qualify as Section 503(b)(9) administrative expense claims. To the extent such claims would ultimately receive administrative priority treatment, the prepetition payment sought herein serves the interests of administrative convenience and reduces the costs associated with claims reconciliation, litigation, and the potential for disputes over the

53. The Debtor, in consultation with KHP and its management team, has undertaken a preliminary analysis of which Critical Vendor claims may include a Section 503(b)(9) component, focusing on goods delivered to the Debtor within the twenty (20)-day window immediately preceding the anticipated Petition Date. This analysis is ongoing and will be updated as the Petition Date is finalized. The Debtor anticipates that a si

VI. IDENTIFICATION OF CRITICAL VENDORS A. Criteria for Designation as Critical Vendor

54. The Debtor, in consultation with its financial advisor, KHP (James Calloway, Managing Director), and its management team, including Mr. Hale (President), Ms. Restrepo (VP Finance), and Mr. Kurtz (VP Operations), has developed a rigorous set of criteria for identifying Critical Vendors. The Debtor has applied these criteria on a vendor-by-vendor basis to ensure that only those vendors whose continued supply is gen