Contract analysis

From: Nathaniel Bower <nbower@calderwoodharkness.com> To: Georgios Andreadis <g.andreadis@thalassashipping.gr> Cc: Amy Chesterton <achesterton@calderwoodharkness.com> Date: Mon, 31 Oct 2022 06:47:00 -0000 Subject: Recap — Initial Strategy Call (Oct. 31) — Thalassa Shipping / Thalassa Americas — C&H Matter No. 1044-00003

Thank you — and the broader TSL/TAI team — for the productive strategy call earlier today. I wanted to memorialize the key points we discussed and outline concrete next steps so that everyone is aligned as we move forward.

For the record, today's call included the following participants: from the TSL/TAI side — yourself, Irini Dalakoura (CFO), Stavros Papageorgiou (General Counsel, Greece), and Marcus Hale (President, TAI); from Calderwood Harkness — myself, Amy Chesterton, and Nathan Ikeda.

As a preliminary matter, I can confirm that with the engagement letter signed on October 25 and the $500,000 retainer deposited on October 28, the matter is now fully open on our end and work is underway.

**I. DUAL-TRACK APPROACH — SUMMARY OF AGREED STRATEGY**

As we discussed, Calderwood Harkness will pursue two parallel workstreams:

**Track 1 — Out-of-Court Restructuring.** We will negotiate a consensual restructuring with all three principal creditor constituencies: (a) the senior secured lender syndicate ($685 million facility, Nordbank International AG as administrative agent); (b) Dralvecen Mezzanine Capital ($112.3 million mezzanine notes, second lien); and (c) the unsecured noteholders ($50 million, 8.25% Senior Unsecured Notes due 2025, G

**Track 2 — Chapter 11 Contingency Planning.** In parallel, we will prepare a comprehensive contingency plan for a potential Chapter 11 filing by Thalassa Americas Inc., the Delaware subsidiary, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. We have identified the Houston venue based on TAI's principal office at 1400 McKinney Street, Suite 2200, Houston, TX 77010. This workstream s

I want to emphasize that this dual-track approach is entirely standard in situations like this. In our experience, creditors negotiate more constructively when they know the debtor has a credible and well-prepared alternative. There is no inconsistency in pursuing both tracks simultaneously — to the contrary, it is the responsible course of action.

**II. CURRENT SITUATION — KEY POINTS FROM TODAY'S DISCUSSION**

**Liquidity and Covenant Breaches.** TSL breached the Minimum Liquidity Covenant on September 15, 2022, when cash dropped to $27.3 million against a $40 million covenant minimum — a shortfall of $12.7 million. As of September 30, 2022, TSL is also in breach of the Maximum Net Leverage Ratio (7.82x actual vs. 5.50x covenant) and the Minimum Interest Coverage Ratio (1.74x actual vs. 2.50x covenant). These are serious d

**Forbearance Agreement.** The forbearance agreement executed on October 10, 2022, with the senior secured lender syndicate provides a 90-day standstill through January 8, 2023. That gives us approximately 69 days from today. Time is limited, and we need to be disciplined about how we use it. A priority for our team this week is a detailed review of the forbearance to understand all termination events, information co

**Revenue Decline.** The macro environment is difficult and well understood by the market, but the numbers bear repeating. The Baltic Dry Index declined approximately 58% between January and September 2022. TSL's average daily TCE fell from $24,800/day to $11,200/day over the same period. TSL's estimated FY2022 revenue is approximately €987 million, down 30.5% from €1.42 billion in FY2021. TAI's revenues have likewis

**Total Debt Position (as of September 30, 2022).** Approximately $847.3 million across all facilities, broken down as follows:

- Senior Secured Credit Facility: $540 million outstanding ($270 million Term Loan A, $185 million Revolver, $85 million Term Loan B) - Mezzanine Notes (Dralvecen): $112.3 million (including PIK capitalization) - Senior Unsecured Notes: $50 million - Intercompany Note (TAI to TSL): $76.4 million - Trade Payables: approximately $38.7 million - Total: approximately $816.7 million in funded debt plus $38.7 million in tr

**Upcoming Unsecured Note Interest Payment.** The semi-annual interest payment of $2,062,500 on the 8.25% Senior Unsecured Notes is due December 1, 2022. We discussed at length the implications of a potential missed payment — the indenture provides a 30-day cure period, meaning an Event of Default would not ripen until approximately January 1, 2023. However, missing a scheduled payment sends a very public signal and

**Ad Hoc Group of Senior Secured Lenders.** An informal group has already formed, comprising Nordbank International AG ($137 million), Harborstone Bank ($95 million), Triton Credit Partners ($68 million), and Continental Maritime Lending ($72 million). Collectively, they hold approximately $372 million, or roughly 54.3% of the $685 million senior secured facility. The group is represented by Whitfield, Crane & Burges

**Dralvecen Mezzanine Capital.** Dralvecen holds $112.3 million in second-lien mezzanine notes at 11.5% PIK toggle (all PIK since Q2 2022). They are represented by Kellner & Foss LLP (Theodore Kellner). The mezzanine sits squarely at the fulcrum of the capital structure — in a Chapter 11 scenario, recovery would likely be partial, making Dralvecen a key swing party. Their economic interest gives them reasons to engag

**Unsecured Noteholders.** An informal group of unsecured noteholders has organized and is represented by Ashford, Brightmoor Group & McKay PC (Carolyn Brightmoor Group). In a Chapter 11 scenario, recovery for the unsecured notes would be materially impaired — potentially pennies on the dollar depending on fleet valuations. This dynamic should serve as a strong motivator for the unsecured holders to support an out-of

**Trade Creditors.** Approximately $38.7 million outstanding, with the largest exposure being Olympian Fuel & Supply SA at $9.2 million for bunker fuel. These are operationally critical vendors. In either track, we will need to handle trade creditors carefully to ensure continued operations — any disruption to fuel supply or port services could have cascading effects on revenue.

**IV. IMMEDIATE NEXT STEPS AND ACTION ITEMS**

1. **Forbearance Agreement Review (C&H — Amy Chesterton / Nathan Ikeda).** Amy and Nathan will complete a detailed review of the forbearance agreement and prepare an analysis memo identifying key risks, termination triggers, information delivery requirements, and recommended positions for any extension negotiation. Target completion: **by November 5.**

2. **Financial Advisor Engagement (TSL/TAI — Irini Dalakoura).** We discussed the need to formally engage Kensington Veltrian Partners LLC as financial advisor to TSL/TAI. James Calloway (Managing Director) will lead the engagement. KHP will be critical for preparing the 13-week cash flow model, enterprise valuation, and creditor recovery analysis — all of which are prerequisites for any meaningful creditor negotiati

3. **Fleet Appraisal (TSL — Drakos Maritime Valuations Ltd.).** Captain Nikos Drakos is scheduled to deliver an updated fleet appraisal as of November 1, 2022. This will be essential for our valuation analysis and collateral assessment — the senior secured lenders will look to it closely, and we need to understand the gap between outstanding debt and collateral value. The most recent appraisal (January 2022) valued t

4. **Greek Counsel Coordination (C&H — Nathan Ikeda).** Calderwood Harkness will coordinate with Vassiliou & Demetriou Law Offices (Alexandros Vassiliou) on Greek law matters, including: (a) potential implications under Greek Law 4738/2020 (the Greek Debt Settlement & Insolvency Code) if the parent entity were to face proceedings in Greece; (b) Chapter 15 recognition considerations if a parallel U.S. proceeding is ne

5. **D&O Insurance Review (C&H / TSL).** We need to confirm the status and adequacy of TSL's directors' and officers' liability insurance policy (Promontory Indemnity Insurance Co., policy no. PII-DO-2022-08847, $25 million aggregate limit, brokered through Seaward & Beckett Insurance Brokers). When a company is operating in the zone of insolvency, fiduciary duty obligations expand to include creditor interests, and

6. **Document Collection (TSL/TAI — Irini Dalakoura / Marcus Hale).** Irini and Marcus, please coordinate to provide Calderwood Harkness with the following as soon as practicable:

- Senior Secured Credit Agreement (dated June 15, 2019) and all amendments - Intercreditor Agreement (dated June 15, 2019) - Mezzanine Notes documentation (purchase agreement, note instruments, security documents) - Unsecured Notes Indenture (dated March 1, 2020) - Intercompany promissory note ($76.4 million, TAI to TSL) - All vessel mortgage documentation

As you know, we sent a formal document request to Henrik Lüdemann at Nordbank on October 27 for agent-side documents, but having the company's own files in parallel will allow us to move faster.

7. **CRO Standby.** We briefly discussed the potential need for a Chief Restructuring Officer for TAI if the Chapter 11 track is activated. We have identified Alderney Management Advisors LLC (Rick Thornberg) as a strong candidate — Rick has served as CRO in three prior shipping Chapter 11 cases and knows the industry well. No engagement is needed at this time, but we will keep this option ready and can move quickly

8. **Claims Agent Standby.** Similarly, we will engage Pendleton Claim Services Inc. (Laura Pendleton) on a standby basis for claims and noticing agent services. This is a precautionary measure — if a filing becomes necessary, having the agent pre-engaged saves critical time on Day 1 and ensures a smooth first-day hearing.

| Target Date | Milestone | |---|---| | By November 5 | Complete forbearance agreement analysis; finalize KHP engagement | | By November 8 | Receive Drakos fleet appraisal; Nathan Ikeda to circulate initial COMI / Chapter 15 memo | | Week of November 14 | Initial call with Whitfield, Crane & Burgess (Ad Hoc Group counsel) to gauge lender appetite for restructuring; sign Pendleton standby engagement | | By end of Nove

January 8 is the date that governs everything. Before that deadline, we will need either a concrete extension of the forbearance or demonstrable progress toward a deal — ideally a term sheet or RSA in principle — that gives the senior lenders confidence to maintain the standstill. We will calibrate all workstreams to that timeline.

Georgios, I recognize that this is a challenging period for the Kostandinos family and for everyone at TSL and TAI who has built this business. I want to be direct: the situation is serious, and the timeline is tight. But based on what we reviewed today, I believe there is a viable path to a consensual resolution. The stakeholder dynamics — particularly the economic incentives for Dralvecen and the unsecured notehold

Amy Chesterton will be the day-to-day contact for this engagement and will be scheduling individual calls with Irini, Marcus, and Stavros this week to begin working through the document collection and specific workstream assignments.

I would ask that you share this recap with Chairman Dimitrios Kostandinos and Vice Chairwoman Elena Kostandinos-Pavlou for their awareness. If either has questions or would like to speak directly, I am of course available.

Let's plan to regroup later this week — I will propose a time once we have had a chance to complete our initial document review and can report on findings.

Thank you again for your confidence in Calderwood Harkness. We are fully committed to this engagement.

**Nathaniel Bower** Partner Calderwood Harkness LLP One Liberty Plaza, 46th Floor New York, NY 10006 T: (212) 555-4100 | D: (212) 555-4127 nbower@calderwoodharkness.com

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