Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the proposed debtor-in-possession ("DIP") financing budget and the adequate protection framework that would be required in the event Thalassa Americas Inc. ("TAI" or the "Company") files a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern D

II. Background A. The Parties and Capital Structure Thalassa Americas Inc. TAI is a Delaware C-corporation (EIN 84-3291057) and a wholly-owned subsidiary of Thalassa Shipping & Logistics SA ("TSL"), a Greek société anonyme (societas anonyma) headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. TAI maintains its principal office at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI was organized to serve

III. Proposed DIP Budget — 13-Week Cash Flow and 12-Month Projections A. Overview of Budget Framework The DIP budget has been prepared in coordination with Kensington Veltrian Partners LLC ("KHP"), the Company's retained financial advisor. James Calloway, Managing Director at KHP, has overseen the preparation of the budget and the underlying financial projections. KHP was retained pursuant to an engagement letter dat

IV. Adequate Protection Analysis A. Legal Framework The requirement to provide adequate protection to the holders of interests in property of the estate is a fundamental principle of the Bankruptcy Code and arises in several contexts relevant to the proposed DIP financing. The principal statutory provisions governing the adequate protection obligations at issue in this case are as follows.

Section 361 of the Bankruptcy Code prescribes the permissible forms of adequate protection. Adequate protection may be provided by: (1) requiring the debtor to make periodic cash payments to the extent that the stay under §362, the use of property under §363, or the granting of a lien under §364 results in a decrease in the value of the creditor's interest in property; (2) providing an additional or replacement lien

Section 363(e) of the Bankruptcy Code provides that upon the request of an entity with an interest in property used, sold, or leased by the debtor (or proposed to be used, sold, or leased by the debtor), the court shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest. This provision is relevant to TAI's continued use of the fleet and other collateral duri

Section 364(d)(1) of the Bankruptcy Code is the provision most directly at issue in connection with the proposed DIP financing. Section 364(d)(1) provides that the court may authorize the debtor to obtain credit secured by a senior or equal lien on property of the estate that is already subject to a lien — i.e., a "priming lien" — only if: (A) the debtor is unable to obtain such credit otherwise, and (B) there is ade

1. Equity Cushion Analysis. The equity cushion available to the Senior Secured Lender syndicate is the starting point for the adequate protection analysis. The relevant collateral values, claim amounts, and resulting cushion calculations are as follows. Collateral Value — Fleet Appraisal. The Drakos Maritime Valuations Ltd. appraisal dated November 1, 2022 values the TSL fleet at $623 million. The first-priority lien

2. Proposed Adequate Protection Package for Senior Secured Lenders. Based on the foregoing analysis and consistent with the terms contemplated in the DIP term sheet, we propose the following adequate protection package for the Senior Secured Lender syndicate: Replacement Liens. The Senior Secured Lender syndicate would receive replacement liens on all postpetition assets of the estate, including DIP proceeds and all

3. Risk Factors. Several risk factors warrant consideration in evaluating the adequacy of the proposed adequate protection package for the Senior Secured Lender syndicate: Continued BDI Decline. The equity cushion analysis is based on the Drakos Maritime Valuations appraisal dated November 1, 2022, which reflected market conditions as of that date. The BDI has continued to exhibit volatility since November 2022, and

1. Equity Cushion Analysis. BMC holds second-priority liens on the same collateral pool that secures the Senior Secured Credit Facility. BMC's adequate protection position must be analyzed in the context of the entire lien stack, as the equity available to BMC is the residual value remaining after satisfaction of the DIP claims and the senior secured claims. At the Drakos Fleet Appraised Value ($623 million): Senior

2. Proposed Adequate Protection Package for BMC. Given the thin-to-nonexistent equity cushion protecting BMC's second-lien position, the proposed adequate protection package for BMC is necessarily more limited than the package offered to the Senior Secured Lender syndicate. The key elements are as follows: Replacement Liens. BMC would receive junior replacement liens on all postpetition assets of the estate, subordin

3. Risk Factors Specific to BMC. Thin Equity Cushion. As noted above, BMC sits below $615 million in senior claims (DIP plus first-lien) on collateral valued at $623 million. The equity cushion protecting BMC's position is, at best, approximately $48 million (under the high-end broader collateral estimate) and, at worst, only $8 million (under the fleet appraisal alone). Any further decline in fleet values could rend