Contract analysis

I. Executive Summary This memorandum analyzes the interaction between maritime liens, preferred ship mortgages under the Ship Mortgage Act (46 U.S.C. §§31301–31343), and the first-priority liens securing the $685 million Senior Secured Credit Facility (dated June 15, 2019) extended to Thalassa Shipping & Logistics Société Anonyme ("TSL") and its subsidiaries. The analysis focuses with particular attention on potentia

II. Background and Factual Context A. The Parties and the Fleet Thalassa Shipping & Logistics Société Anonyme ("TSL"). TSL is a Greek société anonyme, headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. The company was founded in 1987 by the Kostandinos family and has grown into a mid-market dry-bulk and container shipping operator with global operations. TSL's current officers include Georgios Andreadis (Chief

III. Overview of Maritime Lien Law A. Nature and Source of Maritime Liens A maritime lien is a privileged claim upon a vessel, her freight, or other maritime property, arising by operation of admiralty law and enforceable through an in rem action against the vessel itself. The lien is a property interest in the vessel — not merely a personal claim against the vessel owner — and it travels with the vessel regardless o

1. Seamen's Wages. Liens for seamen's wages hold the highest priority under the general maritime law. This priority has been recognized since the earliest days of admiralty jurisprudence and is virtually undefeatable. The maritime lien for wages encompasses not only base wages but also claims for maintenance and cure — i.e., the obligation of the vessel owner to provide food and lodging ("maintenance") and medical tr

2. Salvage. Claims by persons who render salvage services to a vessel in peril — that is, who voluntarily and successfully assist in preserving the vessel from a recognized danger at sea — give rise to maritime liens of the second-highest priority. Salvage liens rank immediately below seamen's wage liens and above all other categories of maritime liens and preferred ship mortgages.

3. Tort Claims (Collision and Personal Injury). Maritime liens arising from maritime torts — including vessel-on-vessel collisions, allisions (i.e., the striking of a fixed object), oil spills, and personal injury or death caused by the vessel's operation — rank third in the traditional priority hierarchy. These tort liens have priority over both liens for necessaries and preferred ship mortgages.

4. Liens for Necessaries. A person who provides "necessaries" to a vessel — including supplies, repairs, provisions, fuel, towage, pilotage, and other goods and services reasonably required for the vessel's operation — is entitled to a maritime lien on the vessel under 46 U.S.C. §31342, provided the necessaries were furnished on the order of the owner or a person authorized by the owner. This category is discussed in

5. Preferred Ship Mortgage Liens. The Ship Mortgage Act grants holders of qualifying "preferred" ship mortgages a statutory lien on the mortgaged vessel, which has priority over all claims against the vessel except the four categories of maritime liens listed above, as well as certain court costs and expenses. This category is discussed in detail in Section IV below. Nordbank's first-priority ship mortgages on the 50

6. State Law Liens and Other Statutory Liens. Liens arising under state law, including materialmen's liens, mechanic's liens, and similar claims, are generally subordinate to all of the foregoing categories in admiralty proceedings. Two additional principles of maritime lien priority are worth noting: The "Inverse Order" Rule. Within a given category of maritime liens, liens that arise later in time generally take pr

IV. The Ship Mortgage Act — Preferred Ship Mortgage Analysis A. Framework of the Ship Mortgage Act (46 U.S.C. §§31301–31343) The Ship Mortgage Act, originally enacted in 1920 and now codified as part of CIMLA at 46 U.S.C. §§31301–31343, provides a statutory framework for the creation and enforcement of "preferred" ship mortgages. The essential purpose of the Act is to encourage ship financing by giving mortgagees a p

V. Analysis of Specific Maritime Lien Risks for the TSL Fleet A. Olympian Fuel & Supply SA — Bunker Fuel Lien ($9.2 Million) Olympian Fuel & Supply SA ("Olympian"), located at 7 Iroon Polytechniou, Piraeus 18535, Greece, is TSL's largest individual trade creditor and is owed approximately $9.2 million as of September 30, 2022, for bunker fuel supplied to various TSL vessels. Given the discussion of maritime lien law

VI. Interaction of Maritime Liens with the Bankruptcy Code's Automatic Stay A. Applicability of the Automatic Stay (11 U.S.C. §362) to Maritime Lien Enforcement If TAI files a Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of Texas (Houston Division), the automatic stay under 11 U.S.C. §362(a) will immediately take effect, enjoining virtually all actions against the debtor, the debtor's pr

VII. Impact on the Intercreditor Agreement and Recovery Waterfall A. Intercreditor Agreement Provisions The Intercreditor Agreement dated June 15, 2019 between Nordbank (as first-lien agent) and BMC governs the relative priorities, rights, and remedies of the first-lien and second-lien creditors with respect to the shared collateral. The Intercreditor Agreement addresses, among other things: the priority of the first

VIII. Practical Recommendations Based on the foregoing analysis, we make the following practical recommendations in connection with the ongoing restructuring planning for the TSL/TAI enterprise. A. Trade Creditor Payment Strategy We recommend that TSL continue to pay — or promptly cure — all outstanding claims by suppliers of necessaries, and in particular the $9.2 million owed to Olympian Fuel & Supply SA, in order