Contract analysis

1. Thalassa Americas Inc. is a Delaware C-Corporation and the wholly-owned U.S. operating subsidiary of Thalassa Shipping & Logistics Société Anonyme ("TSL"), a Greek société anonyme organized under the laws of the Hellenic Republic and headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI's Employer Identification Num

2. By this Application, the Debtor seeks authority to retain and employ KHP as its financial advisor, nunc pro tunc to the Petition Date, pursuant to sections 327(a) and 328(a) of the Bankruptcy Code. KHP is a nationally recognized financial advisory firm headquartered at 300 Park Avenue, 12th Floor, New York, New York 10022. James Calloway, a Managing Director of KHP, is the primary professional responsible for the

3. KHP was originally retained prepetition by TSL and TAI in connection with the Debtor's out-of-court restructuring process, which commenced in the fall of 2022 following covenant breaches under the Debtor's senior secured credit facility and a severe downturn in the global dry-bulk shipping market. The Debtor seeks to continue that engagement in the Chapter 11 case, without interruption, given the critical importan

4. The relief sought herein is essential to the Debtor's restructuring efforts. The Debtor's capital structure is complex and involves multiple layers of indebtedness, including (a) a $685 million senior secured credit facility (the "Senior Secured Credit Facility") among a nine-member international lending syndicate, (b) $112.3 million in mezzanine notes (the "Mezzanine Notes") held by a single institutional holder,

5. As described in further detail below and in the Verified Statement of James Calloway attached hereto as Exhibit A (the "Calloway Declaration"), KHP is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code, does not hold or represent an interest adverse to the Debtor's estate, and is qualified to serve as the Debtor's financial advisor in this Chapter 11 case.

II. BACKGROUND A. The Debtor and Its Business

6. TAI operates the U.S.-side business of the TSL conglomerate, a diversified international shipping and logistics enterprise. TAI's operations encompass three principal business lines: (a) Houston terminal operations, centered on the Debtor's leased deepwater terminal facility at the Port of Houston; (b) Jones Act–exempt foreign-flag vessel scheduling, whereby TAI coordinates the deployment and chartering of TSL's f

7. TSL was founded in 1987 by the Kostandinos family, which continues to control the enterprise through KFO Holdings Société Anonyme, a Greek holding company. Dimitrios Kostandinos serves as Chairman of TSL's board of directors and, through KFO Holdings, holds approximately 62% of the equity interests in TSL. Elena Kostandinos-Pavlou serves as Vice Chairwoman of the TSL board and, through KFO Holdings, holds approxim

8. TSL operates a fleet of fifty (50) vessels, consisting of thirty-eight (38) dry-bulk carriers and twelve (12) container vessels. The dry-bulk fleet comprises ten (10) Capesize vessels, fourteen (14) Panamax vessels, and fourteen (14) Supramax vessels. The container fleet comprises twelve (12) Sub-Panamax vessels. TSL maintains terminal facilities at Piraeus, Greece; Thessaloniki, Greece; and Houston, Texas (operat

9. TAI's officers are Marcus Hale (President), Diana Restrepo (Vice President of Finance), and Jonathan Kurtz (Vice President of Operations). TSL's board of directors includes, in addition to Dimitrios Kostandinos and Elena Kostandinos-Pavlou, Georgios Andreadis (Chief Executive Officer) and Irini Dalakoura (Chief Financial Officer).

10. TSL employs approximately 4,200 people globally, of which approximately 680 are employed in the United States through TAI. TAI's U.S. workforce includes terminal operations personnel, vessel scheduling and chartering staff, freight brokerage professionals, and corporate and administrative employees based at the Houston headquarters.

11. TAI generated revenue of approximately $312 million in the fiscal year ended December 31, 2021 ("FY2021"). However, as a result of the severe downturn in the global dry-bulk shipping market described below, TAI's revenue for the fiscal year ended December 31, 2022 ("FY2022") is estimated at approximately $198 million, representing a decline of approximately 36.5% year-over-year. On a consolidated basis, TSL gener

12. The Debtor's capital structure, including the obligations of TSL and TAI thereunder, is summarized as follows:

1. Senior Secured Credit Facility.

13. Pursuant to a Credit Agreement originally dated June 15, 2019, as subsequently amended (the "Credit Agreement"), TSL, as borrower, and TAI, as co-borrower with respect to the U.S. Tranche (defined below), obtained a $685 million senior secured credit facility (the "Senior Secured Credit Facility") from a nine-member syndicate of international lending institutions (the "Senior Secured Lenders"), with Nordbank Inte

14. As of September 30, 2022, the total outstanding principal balance under the Senior Secured Credit Facility was approximately $540 million, comprising $270 million under Term Loan A, $185 million under the Revolving Credit Facility, and $85 million under Term Loan B (the U.S. Tranche).

15. Interest under the Senior Secured Credit Facility accrues at a rate of SOFR plus 375 basis points, subject to a default rate of an additional 200 basis points upon the occurrence and during the continuance of an event of default under the Credit Agreement. The original maturity date of the Senior Secured Credit Facility is June 15, 2024.

16. Obligations under the Senior Secured Credit Facility are secured by first-priority liens on substantially all of the assets of TSL and TAI, including (a) all fifty (50) vessels in the TSL fleet, (b) the Houston terminal lease, (c) all accounts receivable of TSL and TAI, and (d) the equity interests in TAI and in each of the fourteen (14) vessel-owning SPVs.

17. The nine members of the Senior Secured Lender syndicate and their respective commitments under the Credit Agreement are as follows:

18. TSL issued mezzanine notes (the "Mezzanine Notes") in the original principal amount of $100 million, the entirety of which is held by Dralvecen Mezzanine Capital LLC ("BMC"), 600 Lexington Avenue, 22nd Floor, New York, New York 10022. Interest on the Mezzanine Notes accrues at a rate of 11.5% per annum on a PIK toggle basis; since the second quarter of 2022, all interest has been paid in kind. As of September 30,

19. TSL issued senior unsecured notes (the "Unsecured Notes") in the aggregate principal amount of $50 million. The Unsecured Notes bear interest at a rate of 8.25% per annum, payable semi-annually in cash. The Unsecured Notes mature on March 1, 2025. Garrison Trust Company ("Garrison Trust"), 100 Wall Street, 16th Floor, New York, New York 10005, serves as indenture trustee under the indenture governing the Unsecure

20. TAI owes TSL approximately $76.4 million under a subordinated intercompany promissory note (the "Intercompany Note"), which bears interest at a rate of 5.0% per annum. The Intercompany Note is subordinated to all third-party indebtedness of TAI, including the U.S. Tranche under the Senior Secured Credit Facility.

21. As of the Petition Date, TAI's trade payables were approximately $38.7 million. The Debtor's largest trade creditor is Olympian Fuel & Supply SA, to which TAI owes approximately $9.2 million for bunker fuel and related marine fuel supplies. Additional significant trade creditors include port service providers, vessel maintenance contractors, insurance counterparties, and freight brokerage settlement obligations.

22. A summary of the Debtor's aggregate debt obligations is set forth below: Note: Aggregate third-party debt, inclusive of trade payables, totals approximately $741 million; including the subordinated Intercompany Note, total obligations aggregate approximately $817.4 million. On a consolidated enterprise basis, total funded indebtedness (excluding trade payables and the Intercompany Note) is approximately $847.3 mi

23. The Debtor's financial distress is attributable primarily to a precipitous decline in the global dry-bulk shipping market and a corresponding deterioration in vessel values and charter rates. The Baltic Dry Index ("BDI"), the principal benchmark for dry-bulk shipping rates, declined approximately 58% between January 2022 and September 2022. As a direct consequence of the BDI decline, TSL's average daily time-char

24. Concurrently, the appraised value of the TSL fleet declined materially. As of January 2022, the fleet was appraised at approximately $891 million by Drakos Maritime Valuations Ltd. ("Drakos"), an independent maritime appraisal firm. By November 1, 2022, Drakos's updated appraisal valued the fleet at approximately $623 million, reflecting a decline of approximately $268 million, or 30.1%, in less than eleven month

25. The convergence of declining charter rates, reduced revenues, and falling asset values resulted in a series of covenant breaches and liquidity events, as follows: (a) September 15, 2022 — Minimum Liquidity Covenant Breach. As of September 15, 2022, TSL's unrestricted cash and cash equivalents stood at approximately $27.3 million, which was below the $40 million minimum liquidity covenant threshold under Section 7

26. Based on KHP's analysis, the enterprise value of TSL and TAI on a consolidated basis was estimated at between $580 million and $640 million (midpoint: $610 million) as of November 2022. This valuation range implied that the Senior Secured Lenders were likely to be impaired, that the Mezzanine Notes were significantly underwater (with an estimated recovery of approximately 62.3% at the midpoint enterprise value of

III. KHP'S QUALIFICATIONS AND BACKGROUND

27. KHP is a nationally recognized financial advisory firm with significant experience in restructuring, insolvency, and related advisory matters. KHP maintains its principal office at 300 Park Avenue, 12th Floor, New York, New York 10022, and employs a team of approximately 85 professionals with expertise in restructuring, mergers and acquisitions, capital markets, and litigation support.

28. KHP has substantial experience advising debtors, official committees of unsecured creditors, secured creditor groups, and other parties in interest in complex Chapter 11 cases and out-of-court restructurings across a wide range of industries, including maritime and shipping, energy, transportation, real estate, retail, and telecommunications. KHP's restructuring advisory practice is widely regarded as among the l

29. Of particular relevance to this engagement, KHP has deep expertise in the maritime and shipping industries. KHP professionals have advised on restructurings involving ocean-going vessel fleets, terminal operations, time-charter agreements, vessel mortgage financings, and the unique regulatory and valuation issues that arise in the shipping sector. KHP's familiarity with maritime industry dynamics — including the

30. James Calloway, the Managing Director who leads the KHP engagement team serving the Debtor, has more than twenty years of experience in restructuring advisory. Mr. Calloway has led numerous complex restructurings involving cross-border elements, large secured lending syndicates, and capital-intensive industries. Mr. Calloway's experience includes advisory mandates in cases involving aggregate funded indebtedness

31. KHP has served as financial advisor to debtors, creditors' committees, and other parties in interest in numerous Chapter 11 cases in this Court and in other jurisdictions throughout the United States, including cases in the United States Bankruptcy Courts for the Southern District of New York, the District of Delaware, the Eastern District of Virginia, and the Northern District of Texas. KHP's broad experience wi

IV. PREPETITION RETENTION AND SERVICES RENDERED

32. KHP was retained prepetition by TSL and TAI to advise on restructuring alternatives, prepare financial analyses, and assist in negotiations with the Debtor's creditor constituencies. The prepetition retention was entered into in the ordinary course of business as part of the Debtor's efforts to pursue an out-of-court restructuring prior to a potential Chapter 11 filing.

33. Prepetition, KHP was engaged pursuant to an engagement letter between KHP, TSL, and TAI (the "Engagement Letter"), the terms of which are described in Section VI below. The decision to retain KHP was made by the management and boards of directors of TSL and TAI following a review of the qualifications and proposed terms of several financial advisory firms. KHP was selected based on its established expertise in ma

34. Since its prepetition retention, KHP has provided the following advisory services to the Debtor: (a) Capital Structure Analysis. KHP conducted a comprehensive analysis of the Debtor's capital structure, including the terms, covenants, cross-default provisions, and intercreditor arrangements governing the $685 million Senior Secured Credit Facility, the $112.3 million Mezzanine Notes, and the $50 million Unsecured

35. The prepetition work product developed by KHP — including its enterprise valuation, recovery waterfall analyses, cash flow models, and strategic restructuring analyses — forms the intellectual foundation for the Debtor's restructuring strategy in this Chapter 11 case. KHP's familiarity with the Debtor's business, capital structure, and creditor dynamics is irreplaceable, and any interruption in KHP's engagement w

V. SCOPE OF SERVICES TO BE PROVIDED IN THE CHAPTER 11 CASE

36. In connection with the Debtor's Chapter 11 case, KHP will provide the following financial advisory services: (a) Financial Analysis and Reporting. KHP will prepare and update rolling 13-week cash flow forecasts for TAI and, as appropriate, for TSL on a consolidated basis. KHP will analyze monthly operating reports filed by the Debtor with the Court and the Office of the United States Trustee (the "U.S. Trustee").

VI. TERMS OF RETENTION — COMPENSATION A. Fee Structure

37. The Debtor proposes that KHP be compensated for its services in accordance with the terms of the Engagement Letter, which provides for the following fee arrangement: (a) Monthly Advisory Fee. KHP shall receive a monthly advisory fee of $250,000, payable in arrears on the first business day of each succeeding month. The monthly advisory fee compensates KHP for the ongoing commitment of professional resources to th

38. The Debtor submits that the proposed compensation arrangement is consistent with, and typical of, fee arrangements for financial advisors of similar caliber and standing in complex Chapter 11 cases of comparable size and complexity. The monthly advisory fee of $250,000 reflects the scope of services to be provided, the complexity of the Debtor's capital structure (involving approximately $847.3 million in aggrega

39. The monthly advisory fees and the completion fee will be subject to the approval procedures established by the Court and the applicable guidelines of the Office of the United States Trustee for the Southern District of Texas. KHP will file interim and final fee applications in accordance with sections 330 and 331 of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any applicable orders of this Cour

40. In accordance with the disclosure obligations of Bankruptcy Rule 2016, the Debtor discloses that KHP received certain fees in connection with prepetition services rendered to TSL and TAI. The specific amounts of all prepetition fees paid to KHP will be disclosed with particularity in the final version of this Application and in the Calloway Declaration upon filing.

41. No retainer was required by KHP in connection with its engagement. KHP's compensation has been and will continue to be limited to the monthly advisory fee, the applicable completion or filing fee, and reimbursement of reasonable out-of-pocket expenses, as described above.

VII. KHP'S CONNECTIONS AND DISINTERESTEDNESS — RULE 2014 VERIFIED STATEMENT A. Introduction to Disclosure

42. Pursuant to Bankruptcy Rule 2014(a), the Debtor is required to disclose, in connection with any application for retention of a professional person, all of the professional's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States Trustee, and any person employed in the office of the United States Trustee. In satisfaction of this requiremen

43. Based on information currently available to KHP and the Debtor, KHP has no connection to the Debtor, its creditors, any other party in interest, their attorneys and accountants, the United States Trustee, or any person employed in the office of the United States Trustee, other than as disclosed herein and in the Calloway Declaration.

44. In particular, KHP discloses the following: (a) KHP has represented certain of the lender institutions in the Senior Secured Lender syndicate in matters wholly unrelated to the Debtor, TSL, or the transactions and obligations at issue in this Chapter 11 case. Those prior representations are fully identified and described in the Calloway Declaration. KHP has concluded, and the Debtor concurs, that such prior unrel

45. To the best of the Debtor's knowledge, information, and belief, formed after reasonable inquiry, KHP is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code and does not hold or represent an interest adverse to the estate of the Debtor. KHP is eligible for retention under section 327(a) of the Bankruptcy Code.

VIII. LEGAL BASIS FOR RETENTION A. Section 327(a) Requirements

46. Section 327(a) of the Bankruptcy Code provides, in relevant part: Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trust

47. Section 327(a) applies to the Debtor as debtor-in-possession pursuant to section 1107(a) of the Bankruptcy Code, which provides that the debtor-in-possession has, with certain exceptions not applicable here, the rights and powers of a trustee under the Bankruptcy Code, including the right to employ professionals under section 327.