Contract analysis

I. EXECUTIVE SUMMARY AND RECOMMENDATION This memorandum presents a comprehensive side-by-side comparison of the two restructuring paths currently available to Thalassa Shipping & Logistics SA ("TSL" or the "Company") and its U.S. subsidiary Thalassa Americas Inc. ("TAI" and, together with TSL, the "Thalassa Entities"): (A) the out-of-court Restructuring Support Agreement (the "RSA") currently under negotiation with t

II. BACKGROUND AND CURRENT SITUATION A. The Company Thalassa Shipping & Logistics Société Anonyme. TSL is a shipping and logistics company organized under the laws of the Hellenic Republic (Greece), headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. The Company was founded in 1987 by the Kostandinos family and has grown over the past three and a half decades into a diversified maritime transportation enterprise

1. Senior Secured Credit Facility The Senior Secured Credit Facility was established pursuant to a Credit Agreement dated June 15, 2019, with a total commitment of $685 million. Nordbank International AG serves as Administrative Agent and Collateral Agent. The facility is composed of the following tranches: Term Loan A ("TLA"). Original principal amount of $400 million, amortizing at $10 million per quarter. After 13

2. Mezzanine Notes BMC holds $112.3 million in Mezzanine Notes, consisting of the original principal amount of $100 million plus $12.3 million in payment-in-kind ("PIK") interest that has been capitalized through September 30, 2022. The Mezzanine Notes bear interest at 11.5% on a PIK toggle basis; since Q2 2022, all interest has been paid in kind rather than in cash, reflecting the Company's constrained liquidity pos

3. Unsecured Notes TAI has outstanding $50 million in aggregate principal amount of 8.25% Senior Unsecured Notes. The Unsecured Notes pay interest semi-annually in cash and mature on March 1, 2025. Garrison Trust Company, located at 100 Wall Street, 16th Floor, New York, New York 10005, serves as indenture trustee. The CUSIP number for the Unsecured Notes is 87265BAB5. As noted in Section II.B, the December 1, 2022 i

4. Intercompany Note TAI has issued a subordinated intercompany promissory note in favor of TSL in the principal amount of $76.4 million. The note bears interest at 5.0% per annum and is contractually subordinated to all external indebtedness of TAI. This intercompany note represents one of the principal assets of TSL attributable to its U.S. operations and is a significant consideration in the comparative analysis o

5. Trade Payables As of September 30, 2022, the Thalassa Entities had aggregate trade payables of approximately $38.7 million outstanding to vendors and suppliers. The largest single trade creditor is Olympian Fuel & Supply SA, a bunker fuel supplier, with an outstanding balance of approximately $9.2 million. The treatment of trade payables is a significant consideration in both restructuring paths, given the potenti

6. Total Consolidated Debt The total consolidated indebtedness of the Thalassa Entities as of September 30, 2022 is summarized as follows: Including the intercompany note and trade payables, total funded debt and liabilities aggregate approximately $817.4 million. Total funded external debt (excluding the intercompany note and trade payables) is approximately $702.3 million. Total debt across all facilities, includin

III. DESCRIPTION OF THE TWO RESTRUCTURING PATHS A. Path 1: Out-of-Court RSA The out-of-court RSA represents a consensual, bilaterally negotiated restructuring that would be implemented without any court filing or public disclosure (other than as may be required under applicable securities or regulatory reporting requirements). The RSA is being negotiated among TSL/TAI, the Ad Hoc Group of Senior Secured Lenders, BMC,

1. Senior Secured Facility Amendment The Senior Secured Credit Facility would be amended and restated to implement the following modifications: Maturity Extension. The maturity date of all tranches (TLA, RCF, and TLB) would be extended from June 15, 2024 to June 15, 2027, a three-year extension. This extension provides the Company with the breathing room necessary to navigate the current market downturn and benefit f

2. Mezzanine Notes Exchange The restructuring of the Mezzanine Notes is the central economic element of the RSA and the component that requires the most significant concession from an individual creditor. Exchange Transaction. The $112.3 million in outstanding Mezzanine Notes (inclusive of capitalized PIK interest) would be exchanged for (a) $60 million in aggregate principal amount of new second-lien secured notes (

3. Unsecured Notes Under the RSA, the $50 million Unsecured Notes would remain outstanding and fully unimpaired. There would be no modification to the terms of the indenture governing the Unsecured Notes. The missed December 2022 coupon payment of $2,062,500 would be paid in full in cash at the closing of the RSA. This treatment is designed to cure the existing Event of Default under the indenture and to restore the

4. Equity Contribution KFO Holdings SA, the Kostandinos family's holding company, has agreed in principle to contribute €35 million (approximately $38.2 million at the current exchange rate of €1.00 = $1.0914) in new equity capital to TSL. The proceeds of the equity contribution would be used to (a) fund the Company's near-term liquidity requirements, (b) pay transaction costs associated with the RSA, including profe

5. Asset Sales As part of the RSA, TSL has committed to sell six older dry-bulk carriers (with an average vessel age of approximately 18 years) within 12 months of the RSA closing date. The estimated aggregate proceeds from these sales are approximately $72 million, based on current market valuations adjusted for the age and condition of the specific vessels. Net proceeds from the asset sales, after deducting customa

6. Trade Creditors All trade creditors of the Thalassa Entities would be paid in full in the ordinary course of business. No trade creditor would suffer any impairment of its claims. This treatment preserves the Company's critical vendor relationships, including the bunker fuel supply arrangement with Olympian Fuel & Supply SA, and avoids the operational disruption that would result from vendor payment defaults or su

7. Intercompany Note The $76.4 million subordinated intercompany note from TAI to TSL would be amended to extend its maturity from its current maturity date to December 31, 2028, and to reduce the interest rate from 5.0% to 2.0% per annum. The note would remain contractually subordinated to all external indebtedness of TAI. This amendment preserves the intercompany note as an asset of TSL while reducing the cash burd

IV. COMPARATIVE ANALYSIS: ESTIMATED CREDITOR RECOVERIES A. Methodology The recovery analysis presented in this Section IV is based on financial models and waterfall analyses prepared by KHP and reviewed by C&H. The key assumptions underlying the analysis are as follows: Valuation Basis. The analysis uses KHP's enterprise value estimate of $580 million to $640 million (midpoint $610 million), corroborated by the Drako

V. TIMELINE COMPARISON A. Out-of-Court RSA Timeline The following is the anticipated timeline for the out-of-court RSA, measured from the initial engagement of professional advisors through closing: Total time from advisory engagement to closing: Approximately 8 months (October 2022 to June 2023). Total time from RSA execution to closing: Approximately 3.5 months (mid-March 2023 to June 30, 2023). A key advantage of

VI. COST COMPARISON A. Out-of-Court RSA Estimated Costs The estimated professional fees and transaction costs associated with the out-of-court RSA are as follows: Calderwood & Harkness LLP (Restructuring Counsel). Projected legal fees of approximately $3.5 million to $4.0 million through closing, plus disbursements. As a reference point, actual fees billed through the date of this memorandum total $3,847,250 in fees

VII. OPERATIONAL AND COMMERCIAL IMPACT ANALYSIS A. Customer and Counterparty Risk TSL's shipping operations are fundamentally dependent on long-term charter party relationships and trade lane contracts with customers and counterparties across the Mediterranean Sea, the Black Sea, and transatlantic routes. The Company's competitive position in these markets has been built over more than three decades and is grounded i