Contract analysis

I. Executive Summary This memorandum analyzes the U.S. federal income tax consequences of two specific components of the out-of-court restructuring being implemented under the Restructuring Support Agreement ("RSA") executed on March 14, 2023, between Thalassa Shipping & Logistics SA ("TSL"), Thalassa Americas Inc. ("TAI"), and the lenders under the Senior Secured Credit Agreement dated June 15, 2019 (the "Original C

1. The $5.4 million amendment fee payable in kind (i.e., capitalized into the outstanding principal of the credit facility) under Amendment No. 1 to the Senior Secured Credit Agreement, dated as of May 15, 2023 ("Amendment No. 1"); and

2. The conversion of $75 million of Term Loan A ("TLA") principal from cash-pay interest to payment-in-kind ("PIK") interest, and the ongoing quarterly PIK interest capitalization thereon through the extended maturity date of June 15, 2027. This memorandum is intended to supplement, and should be read in conjunction with, our prior memoranda addressing other tax aspects of the broader restructuring. Specifically, we

II. Background and Relevant Transaction Terms A. The Senior Secured Credit Facility — Original Terms To provide context for the tax analysis, we briefly summarize the material terms of the Original Credit Agreement and the current state of the facility as of the date of the proposed amendment. The Senior Secured Credit Agreement was entered into on June 15, 2019 (the "Original Closing Date"), among TSL, as borrower,

1. Maturity Extension. The maturity date of all three tranches under the facility is extended from June 15, 2024 to June 15, 2027, an extension of three years. This is the single most significant structural change in Amendment No. 1 and reflects the lenders' agreement to provide TSL with additional runway to execute its operational turnaround plan and asset disposition strategy.

2. PIK Conversion of $75 Million of TLA Principal. Of the $270 million TLA balance outstanding as of the date of the amendment (prior to the capitalization of the amendment fee), $75 million is designated as the "PIK TLA" sub-tranche. Interest on this $75 million portion will accrue at the same contractual rate (SOFR plus 375 basis points) but will be paid in kind — that is, capitalized and added to the outstanding p

3. Revolver Commitment Reduction. The total commitment under the Revolving Credit Facility is reduced from $200 million to $150 million. As of the amendment date, the Revolver is drawn to $185 million. Accordingly, $35 million of the drawn balance must be repaid to bring the outstanding amount within the reduced commitment ceiling, or alternatively, the excess draw may be permitted temporarily under the terms of the

4. Financial Covenant Resets. The financial maintenance covenants under the credit agreement are reset as follows to reflect TSL's current financial condition and projected recovery trajectory: • Maximum Net Leverage Ratio: Reset to 7.00x through Q2 2024, stepping down to 6.50x for Q3 2024 through Q1 2025, 6.00x for Q2 2025 through Q3 2025, and 5.50x from Q4 2025 and thereafter. • Minimum Liquidity: Reduced from $40

5. Amendment Fee. An amendment fee equal to 1.00% of the total outstanding principal under the facility ($540 million multiplied by 1.00%, equaling $5.4 million) is payable by the borrowers to the lenders. The fee is payable "in kind" — meaning it is not paid in cash but is instead capitalized and added to the outstanding principal balance of each tranche on a pro rata basis, allocated based on the outstanding balanc

6. Default Interest Waiver. The default interest rate (the additional 200 basis points above the standard contractual rate) that accrued from the date of TSL's first covenant breach on September 15, 2022, is waived retroactively. The waiver eliminates any obligation to pay, and any accrued liability for, the incremental 200 basis points of default interest for the period from September 15, 2022 through the Closing Da

III. Threshold Question: Modification vs. Exchange Under Treas. Reg. §1.1001-3 A. Legal Framework The threshold question for the entire tax analysis is whether Amendment No. 1 constitutes a "significant modification" of the terms of the debt instruments under the Senior Secured Credit Agreement, which would trigger a deemed exchange of the old instruments for new instruments under Treasury Regulation Section 1.1001-3

IV. Tax Treatment of the $5.4 Million PIK Amendment Fee A. Characterization of the Amendment Fee The $5.4 million amendment fee payable under Amendment No. 1 represents compensation paid by the borrowers (TSL and TAI, as applicable) to the lenders in exchange for the lenders' consent to the modifications set forth in Amendment No. 1. The fee is an inducement — the lenders have agreed to extend the maturity, convert a

Section 163(j) Limitation. Under Section 163(j) of the Code, as amended by the Tax Cuts and Jobs Act of 2017, the deduction for business interest expense for any taxable year is limited to the sum of: (i) the taxpayer's business interest income; (ii) 30% of the taxpayer's adjusted taxable income ("ATI"); and (iii) the taxpayer's floor plan financing interest. For TAI (which files a U.S. federal income tax return on F

V. Tax Treatment of PIK Interest on the $75 Million TLA Conversion A. General PIK Interest Tax Principles The conversion of $75 million of TLA from cash-pay interest to PIK interest raises fundamental questions under the OID rules regarding the characterization of the PIK interest for U.S. federal income tax purposes. The analysis turns on whether the PIK interest constitutes "qualified stated interest" ("QSI") under

VI. Interaction Between Amendment Fee OID and PIK Conversion OID The amendment fee OID and the PIK conversion OID must be integrated in the overall OID computation for TLA, as both relate to the same tranche and, in the case of the PIK TLA sub-tranche, are layered on top of each other. Specifically, the $2.7 million of amendment fee OID allocated to TLA must be further allocated between the two TLA sub-tranches: the

VII. Default Interest Waiver — Tax Implications Amendment No. 1 retroactively waives the default interest that accrued on the facility from September 15, 2022 (the date of TSL's first covenant breach under the Original Credit Agreement) through the Closing Date (June 30, 2023), a period of approximately nine and one-half months. The default rate under the Original Credit Agreement is an additional 200 basis points ab