Contract analysis

I. Purpose and Scope This memorandum has been prepared for internal Calderwood & Harkness LLP use to analyze, categorize, and provide detailed drafting commentary on the risk factors included in the near-final fourth draft of the Offering Memorandum (the "OM"), dated September 12, 2022, for the $400,000,000 aggregate principal amount of Senior Secured Notes due 2029 (the "Notes") to be co-issued by Thalassa Shipping

II. Risk Factor Taxonomy and Organization The risk factors in the OM fourth draft are organized into seven principal categories, which were established in the first draft and have remained consistent through subsequent revisions. This organizational framework follows SEC and market convention for high-yield offering memoranda, presenting risks from the broadest (industry-level) to the most specific (tax and jurisdict

1. Risks Related to the Shipping Industry and Freight Markets — addressing macro-level industry risks that affect TSL's operating environment, including cyclicality, charter rate volatility, vessel supply dynamics, and global trade conditions.

2. Risks Related to TSL's Business and Operations — addressing company-specific business risks, including revenue concentration, key personnel dependence, controlling shareholder structure, operational complexity, and insurance coverage.

3. Risks Related to the Fleet and Vessels — addressing risks specific to TSL's fleet of 50 vessels, including vessel concentration, valuation volatility, age and capital expenditure requirements, and flag state and classification matters.

4. Risks Related to the Notes and the Offering Structure — addressing risks inherent in the terms and structure of the Notes, including their speculative-grade nature, refinancing risk, covenant limitations, optional redemption provisions, and transfer restrictions.

5. Risks Related to the Security Package and Collateral — addressing risks associated with the collateral securing the Notes, including enforcement limitations, intercreditor mechanics, guarantor and structural subordination risks, and the distinction between collateral and non-collateral vessels.

6. Risks Related to Environmental, Regulatory, and Compliance Matters — addressing regulatory risks, including IMO sulphur regulations, EU ETS inclusion, ballast water management, and sanctions and anti-corruption compliance.

7. Risks Related to Tax and Jurisdictional Matters — addressing tax risks associated with TSL's multi-jurisdictional structure and the Singapore law governing the transaction documents. The ordering of risks within each category follows the convention of presenting the most material risks first. Within Category 1, for example, shipping industry cyclicality and the Baltic Dry Index are presented before vessel supply d

III. Category 1: Risks Related to the Shipping Industry and Freight Markets Category 1 encompasses macro-level risks affecting the shipping industry and the freight markets in which TSL operates. This category contains eight individual risk factors in the OM fourth draft, of which the four most significant are discussed below with drafting commentary. The remaining four risk factors in this category (relating to seas

III.A. Shipping Industry Cyclicality and the Baltic Dry Index The dry-bulk and container feeder shipping industries are highly cyclical, driven by fluctuations in global commodity demand, trade volumes, vessel supply, and macroeconomic conditions. TSL's revenue and earnings are significantly correlated with the Baltic Dry Index ("BDI"), which is the most widely followed composite measure of dry-bulk shipping rates. T

III.B. Charter Rate Volatility TSL derives its revenue from three principal chartering arrangements: time charters, voyage charters, and contracts of affreightment ("COAs"). Each of these arrangements exposes TSL to charter rate volatility, although the nature and timing of the exposure differs among them. Time charters provide fixed daily hire rates for the duration of the charter period, mitigating short-term rate

III.C. Vessel Supply and Newbuilding Overhang The global fleet of dry-bulk carriers and container feeder vessels is subject to supply-side dynamics that can materially affect charter rates and vessel values. An oversupply of vessels in the global fleet, whether resulting from the delivery of newbuild orders, reductions in scrapping rates, or decreases in demand, can depress charter rates and vessel values for extende

III.D. Global Trade and Macroeconomic Conditions TSL's primary trade lanes — the Eastern Mediterranean, the Black Sea, and Southeast Asia — are sensitive to geopolitical disruptions, sanctions regimes, and regional economic conditions. The OM fourth draft includes a general discussion of macroeconomic risks and their impact on global trade, including references to GDP growth rates, industrial production indices, and

IV. Category 2: Risks Related to TSL's Business and Operations Category 2 encompasses risks specific to TSL's business, corporate structure, and operations. This category contains nine individual risk factors in the OM fourth draft, of which the five most significant are discussed below with drafting commentary. The remaining four risk factors in this category (relating to competition, technological disruption, labor

IV.A. Revenue Concentration and Customer Dependence TSL derives a significant portion of its revenue from a limited number of charterer counterparties. The OM fourth draft discloses that TSL's top five charterers accounted for approximately 38% of total revenue in the twelve months ended June 30, 2022, and that no single charterer accounted for more than 12% of total revenue during that period. While this level of co

IV.B. Dependence on Key Personnel TSL was founded in 1997 by the Kallistratos family and has been led by family members since its inception. Dimitrios Kallistratos, the founder and Chairman, is 68 years old and has over 40 years of experience in the shipping industry. His daughter, Elena Kallistratos-Pavlou, serves as Vice Chairwoman and oversees fleet management, including vessel acquisition and disposal decisions,

IV.C. Controlling Shareholder Risk TSL's equity ownership is concentrated in Kallistratos Maritime Holdings Ltd. (BVI), which holds 72.5% of TSL's issued and outstanding shares. Dimitrios Kallistratos is the sole beneficial owner of KMH. Pelagos Capital Partners Fund III LP, a Cayman Islands-domiciled private equity fund managed by Pelagos Capital Management Ltd. (Andreas Vournas, Managing Partner), holds 18.0% of TS

IV.D. Integration and Operational Risks TSL operates an integrated business model that encompasses vessel operations (dry-bulk and container feeder), port logistics services, and freight-forwarding operations. While this integrated model provides diversification of revenue streams and potential operational synergies, it also creates operational complexity and execution risk. TSL's operations span multiple jurisdictio

IV.E. Insurance and Casualty Risk TSL maintains marine insurance coverage consistent with industry practice, including hull and machinery insurance, protection and indemnity ("P&I") insurance through the Stonefield Insurance, war risk insurance, loss of hire insurance, and cargo liability insurance. The risk factor as drafted addresses the risk that insurance coverage may be insufficient to cover all potential losses

V. Category 3: Risks Related to the Fleet and Vessels Category 3 addresses risks specific to TSL's fleet of 50 vessels. This category contains seven individual risk factors in the OM fourth draft, of which the four most significant are discussed below with drafting commentary. The remaining three risk factors in this category (relating to drydocking schedule risk, vessel operating cost inflation, and charterer damage

V.A. Vessel Concentration Risk TSL's fleet consists of 50 vessels: 38 dry-bulk carriers (comprising Supramax, Ultramax, and Kamsarmax class vessels) and 12 container feeder vessels, with a total deadweight tonnage ("DWT") of approximately 2,850,000. The fleet is concentrated in mid-size dry-bulk segments, which creates vulnerability to segment-specific demand shifts. If demand for Supramax, Ultramax, or Kamsarmax-cla

V.B. Vessel Valuation Volatility TSL's fleet was appraised as of June 2022 by Compass Marine Valuations Ltd. (Robert Hargreaves, Managing Director) at approximately $1.82 billion (total fleet) and $1.175 billion (28 Collateral Vessels), based on desktop valuations. Vessel values are highly correlated with charter rates and are themselves cyclical, often exhibiting greater volatility than charter rates due to the capi

V.C. Vessel Age and Capital Expenditure Requirements The average age of TSL's fleet of 9.2 years places the fleet approximately in the middle of its economic life. While a relatively young average age is generally viewed favorably by investors (reducing near-term obsolescence and regulatory compliance risk), it also implies substantial future capital expenditure requirements for ongoing drydocking, maintenance, and e

V.D. Flag State and Classification Society Risks TSL's fleet is registered across multiple flag states, including Malta, the marshall Islands, Singapore, and others. Each flag state imposes its own regulatory requirements relating to vessel registration, safety standards, environmental compliance, and crewing. The risk factor addresses the risk that a vessel could lose its registration or fail to comply with flag-sta

VI. Category 4: Risks Related to the Notes and the Offering Structure Category 4 addresses risks inherent in the terms, structure, and legal framework of the Notes. This is the largest category in the OM, containing eleven individual risk factors. The eight most significant are discussed below with drafting commentary. The remaining three risk factors (relating to currency exchange risk on Notes denominated in USD, F

VI.A. High-Yield Notes — General Risks The Notes are high-yield, speculative-grade debt instruments. They have received preliminary ratings of B+ (stable outlook) from Polaris Ratings Group Ltd. (assigned August 8, 2022) and B1 (stable outlook) from Oceanic Credit Assessments Inc. (assigned August 10, 2022). These ratings reflect the rating agencies' assessment of the Issuers' ability to meet their payment obligation

VI.B. Refinancing and Liquidity Risk The Notes mature on October 15, 2029, representing a seven-year tenor from the anticipated closing date. At maturity, the Issuers will be required to repay the entire $400 million principal amount of the Notes (together with any accrued and unpaid interest). There can be no assurance that the Issuers will have sufficient cash on hand or will be able to refinance the Notes at or pr

VI.C. Incurrence-Based Covenant Limitations The Indenture contains a set of covenants that restrict the activities of the Issuers and their restricted subsidiaries. However, with the important exception of the collateral coverage ratio maintenance covenant (2.00x, tested semi-annually), the covenants in the Indenture are predominantly incurrence-based rather than maintenance-based. This distinction is critical for in

VI.D. Optional Redemption and Make-Whole Risk The Notes are subject to optional redemption by the Issuers under the following call structure: In addition, within 180 days of an initial public offering ("IPO") of TSL's equity securities, the Issuers may redeem up to 40% of the aggregate principal amount of the Notes at a redemption price of 108.750% of par (the "Equity Clawback"). The risk factor addresses the risk th

VI.E. Change of Control Upon the occurrence of a Change of Control (as defined in the Indenture), each holder of Notes has the right to require the Issuers to repurchase all or any portion of such holder's Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest. A "Change of Control" is defined in the Indenture to include, among other things, any person or group (oth

VI.F. Co-Issuer / SPV Structure Thalassa Finance Pte. Ltd. ("TFPL"), UEN 202209345K, is a wholly-owned subsidiary of TSL incorporated in Singapore as a private company limited by shares. TFPL was established for the purpose of serving as co-issuer of the Notes and as the entity through which intercompany loan receivables are held and administered. TFPL's sole director is Marina Demetriou, who also serves as CFO of TS

VI.G. Transfer Restrictions and Liquidity of the Notes The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes are being offered and sold only to qualified in

VI.H. Asset Sale Covenant The Indenture requires that if the Issuers or any restricted subsidiary consummates an asset sale generating net proceeds in excess of $15 million per transaction (or series of related transactions), 100% of such net proceeds must be applied, within 365 days following the receipt thereof, to either (i) make an offer to repurchase Notes at par or (ii) reinvest such proceeds in assets useful i

VII. Category 5: Risks Related to the Security Package and Collateral Category 5 addresses risks associated with the security package securing the Notes. This category contains six individual risk factors in the OM fourth draft. The four most significant are discussed below with drafting commentary. The remaining two (relating to the risk of vessel arrest by third parties and the risk of impairment of collateral valu

VII.A. Collateral Coverage and Enforcement Limitations The security package for the Notes consists of the following: • First-priority ship mortgages over 28 Collateral Vessels (appraised at $1.175 billion as of June 2022 by Compass Marine Valuations Ltd.) • Assignment of earnings generated by the 28 Collateral Vessels (including hire, freight, demurrage, and other payments receivable by the Issuers or the fleet-ownin

VII.B. Intercreditor Agreement and Priority The Intercreditor Agreement governs the priority and enforcement mechanics among the Security Agent, th