Priya,
I hope this finds you well. We are preparing to circulate the near-final credit agreement (to be dated July 3, 2023, once finalized) in clean form. Having reviewed your June 2 third draft alongside the parties' resolution of the majority of the 94 open comments from our June 9 third markup, we are pleased that the document is substantially in agreed form. That said, we have identified 12 documentary points that remain outstanding and require resolution before execution versions of the credit agreement and the security documents (referencing your June 16 security document drafts and our June 23 markups thereto) can be circulated to the syndicate. We would like to work through all of these items as promptly as possible—ideally on a call early next week—given the closing timeline. The items are set out below.
**1. Vessel Release Mechanics (Credit Agreement)**
The mechanics governing the release of vessel mortgages upon a permitted vessel sale require clarification. Borrower's position is that release should be automatic upon (a) repayment of a proportionate share of the outstanding obligations, calculated pro rata based on the appraised value of the released vessel relative to aggregate collateral value, and (b) certification by the Borrower that the minimum collateral coverage ratio of 140% continues to be satisfied after giving effect to such release. Your current draft requires Required Lenders' consent for any release, which Borrower views as unworkable for ordinary-course fleet management. We request that WJA confirm acceptance of the automatic release approach, subject to the collateral coverage test.
**2. Permitted Acquisition Carveout (Negative Covenants)**
The permitted acquisition basket needs to be revised to reflect the parameters discussed in prior rounds. Borrower proposes an individual acquisition cap of $50,000,000 and an aggregate annual cap of $100,000,000 per fiscal year, in each case subject to (i) pro forma compliance with the financial covenants (maximum consolidated net leverage ratio of 4.50:1.00, stepping down to 4.00:1.00 in Year 3; minimum interest coverage ratio of 3.00:1.00), (ii) no default or event of default existing or resulting therefrom, and (iii) satisfaction of the minimum liquidity covenant of $30,000,000 and maximum capital expenditures covenant of $80,000,000 on a pro forma basis. Your current draft contains a blanket prohibition on acquisitions outside the ordinary course, which does not reflect the parties' discussions and needs to be revised.
**3. Guarantor Accession Procedures**
Borrower proposes a 60-day accession period following the formation or acquisition of any new material subsidiary (defined as a subsidiary with assets exceeding $10,000,000) for such subsidiary to accede as a Guarantor under the credit agreement and execute the related security documents. Your draft currently requires accession within 30 days. The 60-day period is necessary given the multi-jurisdictional formation and perfection requirements applicable to the Borrower's subsidiaries (Greece, Cyprus, and the Republic of the marshall Islands) and the need to coordinate with local counsel, including Pavlopoulos & Drakos in Athens. We also note that the accession mechanics should include express cross-references to both the share pledge agreement and the assignment of earnings.
**4. SOFR Fallback / Benchmark Replacement Setting Provisions**
Minor conforming changes are needed here. The parties agreed on the SOFR fallback waterfall during the May 22 negotiation call, but the current draft still contains a legacy placeholder reference in Section 2.14(c) that is inconsistent with the agreed waterfall. We request that WJA confirm this will be cleaned up in the execution version. For the avoidance of doubt, the operative interest rate provisions should reflect SOFR plus the applicable margin of 225–325 basis points, determined by reference to the leverage ratio grid.
**5. Swingline Loan Sublimit Mechanics**
This is a technical drafting point. The swingline sublimit of $15,000,000 needs to be properly integrated with the borrowing mechanics in Section 2.03 and the corresponding repayment provisions. The swingline provisions currently reference a "Swingline Lender" defined term that has not been populated. Please confirm that Meridian Atlantic Bank N.A. will serve as Swingline Lender and populate the defined term accordingly.
**6. LC Sublimit — Fronting Bank Provisions**
Similarly, the letter of credit sublimit of $20,000,000 requires confirmation of the identity of the LC Issuer. The defined term "LC Issuing Bank" remains unpopulated in the current draft. We assume this will be Meridian Atlantic Bank N.A. Please confirm and populate.
**7. Restricted Payments Basket — Dividend Distributions**
The restricted payments basket was substantially agreed in prior rounds, but a conforming change is still needed to the builder basket formulation. Borrower's position, as set forth in our April 18 letter, was accepted conceptually but the current draft language does not yet reflect the agreed formulation. We request that WJA insert the agreed language into the next turn.
**8. Events of Default — Cross-Default Threshold**
The cross-default threshold remains bracketed in the current draft. Borrower proposes $15,000,000, which is consistent with the threshold under Thalassa's existing Harborstone facility (Credit Agreement dated November 15, 2018, as amended). We understand WJA's initial position was $10,000,000. We would appreciate confirmation of the agreed threshold so this bracket can be closed.
**9. Voting / Amendment Mechanics — Supermajority Provisions**
Borrower requests confirmation that the only "sacred rights" requiring unanimous Lender consent (i.e., consent of each affected Lender) are (a) release of all or substantially all of the collateral (other than in connection with permitted dispositions subject to automatic release per Item 1 above) and (b) extension of the maturity date, and that all other amendments and waivers require only Required Lenders (defined as Lenders holding more than 50% of total commitments). The current draft contains an ambiguity as to whether changes to the 140% collateral coverage ratio require unanimous Lender consent or Required Lender consent. We believe this should be a Required Lender item and request that the drafting be clarified.
**10. Security Documents — Form of Ship Mortgage (Pinnacle Trust References)**
The form of First Preferred Ship Mortgage needs to be conformed to reflect Pinnacle Trust & Agency Services Inc. as Collateral Agent in all instances. Several provisions in the current WJA draft still reference "Administrative Agent" where "Collateral Agent" should appear. In addition, the discharge mechanics in the mortgage form need to be made consistent with the vessel release provisions to be agreed upon under Item 1 above.
**11. Assignment of Insurances — War Risk Coverage Threshold**
The assignment of insurances draft currently requires Borrower to maintain war risk coverage at a minimum hull value coverage of 110% of the mortgage amount. Borrower's position is that this fixed threshold is commercially unreasonable and that the requirement should instead track the coverage amounts and terms customarily provided by Trident Marine Insurance Brokers Ltd. for vessels of similar type, age, and trading pattern, with coverage at full hull value consistent with standard P&I club requirements. We would welcome WJA's views on this point.
**12. Schedules and Exhibits — Completion Items**
Several schedules and exhibits remain in placeholder form and need to be completed before execution versions can be circulated:
(a) **Schedule of Mortgaged Vessels** — to reflect the 18 vessels being appraised by Seastone Maritime Advisors Ltd. (appraisals expected by July 10, 2023; aggregate fair market value anticipated at approximately $780,000,000);
(b) **Schedule of Existing Indebtedness**;
(c) **Schedule of Existing Liens**;
(d) **Form of Compliance Certificate**; and
(e) **Form of Assignment and Assumption Agreement** for syndicate transfers — this form will need to accommodate the commitment allocations among Meridian Atlantic Bank N.A. ($45,000,000), Nordkapp Maritime Finance AG ($40,000,000), Clearwater Commercial Lending LLC ($35,000,000), and Eastbourne Capital Partners LLP ($30,000,000).
We request that WJA circulate completed drafts of these schedules and exhibits at your earliest convenience.
* * *
We propose a call on Monday, July 3, or Tuesday, July 4, to work through the above items and resolve any remaining differences. Please let us know your availability and we will circulate a dial-in.
On our side, we are separately preparing the closing checklist (currently anticipated at 78 items) and expect to circulate it shortly after the near-final credit agreement is distributed in clean form. Our objective is to have execution versions in hand for the syndicate lenders to review alongside their confirmed commitments—we understand that confirmations from Nordkapp, Clearwater, and Eastbourne are expected in mid-July.
We appreciate the collaborative working relationship through the multiple drafting rounds and look forward to bringing this to a close efficiently.
Best regards,
**Sophie Tremblay** Senior Associate Calderwood & Harkness LLP 425 Park Avenue, New York, NY 10022 T: +1 (212) 554-7183 E: stremblay@calderwoodharkness.com
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