1044-00002 · Client 1044 · Post-Withdrawal Advisory

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL — PREPARED IN CONNECTION WITH LEGAL REPRESENTATION

CALDERWOOD & HARKNESS LLP 425 Park Avenue, New York, NY 10022 8 Vasilissis Sofias Avenue, Athens 106 74, Greece

July 24, 2023

MEMORANDUM

TO: The Board of Directors of Thalassa Shipping & Logistics SA

Nikolaos Karadimitriou, Founder & Chairman Elena Vassiliou, Chief Executive Officer Dimitrios Pantazis, Chief Financial Officer Aris Komnenidis, General Counsel

FROM: Ian Blackwood, Partner, Banking & Finance, Calderwood & Harkness LLP Sophie Tremblay, Senior Associate, Banking & Finance, Calderwood & Harkness LLP

RE: Meridian Atlantic Bank N.A. — Withdrawal from Mandate for $150,000,000 Senior Secured Revolving Credit Facility; Legal Analysis and Strategic Options

MATTER NO.: 1044-00002

This memorandum is privileged and confidential and is provided solely for the use of the Board of Directors of Thalassa Shipping & Logistics SA. It has been prepared by Calderwood & Harkness LLP in connection with our representation of Thalassa Shipping & Logistics SA and is protected by the attorney-client privilege. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

I. EXECUTIVE SUMMARY

On July 18, 2023, Meridian Atlantic Bank, National Association ("Meridian Atlantic," "MAB," or the "Bank") publicly announced its strategic decision to wind down its Shipping & Maritime Finance Division on a global basis, ceasing all new shipping commitments effective immediately and commencing an orderly run-off of its existing maritime lending portfolio. The announcement, communicated internally by Marcus Whitfield, Head of the Shipping Finance Division, and subsequently confirmed through a press release issued by MAB's corporate communications department, represents one of the most significant withdrawals from the shipping finance sector in recent years and has material implications for Thalassa Shipping & Logistics SA ("TSL," the "Company," or "Thalassa").

On July 19, 2023 — the day following the public announcement — Catherine Hsiang, MAB's Relationship Manager assigned to the TSL account, formally notified TSL of the Bank's withdrawal from the mandate to act as Sole Lead Arranger, Sole Bookrunner, and Administrative Agent for the proposed $150,000,000 senior secured revolving credit facility (the "Proposed Facility"). The notification was delivered via email to Elena Vassiliou (CEO) and Aris Komnenidis (General Counsel) at 9:14 a.m. Eastern Time, followed by a brief telephone call at approximately 10:30 a.m. Eastern Time in which Ms. Hsiang expressed regret but confirmed that the Bank's decision was final and applied to all pending shipping mandates globally.

This notification came after approximately five months of active negotiation and documentation efforts, during which the parties had reached agreement on substantially all material terms of the Proposed Facility. By the time of MAB's withdrawal, the credit agreement was in near-final form (a clean draft having been circulated by Whitmore, Jennings & Alcott LLP on July 3, 2023), vessel appraisals for all eighteen Mortgaged Vessels had been delivered by Seastone Maritime Advisors Ltd. on July 10, 2023, and syndicate commitments totaling $105,000,000 from Nordkapp Maritime Finance AG ($40,000,000), Clearwater Commercial Lending LLC ($35,000,000), and Eastbourne Capital Partners LLP ($30,000,000) had been confirmed on July 14, 2023 — just four days before MAB's announcement.

The Board has asked Calderwood & Harkness LLP ("C&H" or "Calderwood & Harkness") to analyze the legal implications of MAB's withdrawal and to advise on the Company's options going forward. This memorandum addresses the following questions:

(a) Whether MAB's withdrawal from the mandate was contractually permissible under the terms of the Mandate and Fee Letter dated February 14, 2023 (the "Mandate Letter");

(b) Whether TSL has any rights to a refund of fees paid or advanced to MAB under the Mandate Letter;

(c) What options are available to TSL to secure a replacement arranger for the Proposed Facility or a comparable refinancing;

(d) The implications of MAB's withdrawal for the maturity of the existing $125,000,000 revolving credit facility with Harborstone National Bank (the "Existing Facility"), which matures on November 15, 2023; and

(e) The feasibility of amending or extending the Existing Facility as an interim measure to bridge the gap while a permanent refinancing solution is pursued.

Summary of Conclusions. Based on our preliminary analysis, and subject to the caveats and qualifications set forth in this memorandum, we have reached the following conclusions:

MAB's withdrawal, while deeply disruptive to TSL's refinancing plans, appears to constitute a strategic business decision that is not clearly prohibited by the terms of the Mandate Letter. The Mandate Letter was structured on a customary "best efforts" basis rather than as a firm underwriting commitment, and it contains standard conditions to MAB's obligations — including the absence of a material adverse change and the satisfaction of due diligence — that provide MAB with significant latitude. While TSL may have arguments based on the implied covenant of good faith and fair dealing under New York law, the prospects of compelling MAB to proceed with the transaction or recovering significant damages through litigation are uncertain at best and would require protracted and costly proceedings. We recommend preserving TSL's rights through a formal reservation of rights letter while deferring a definitive litigation decision until the Company's more immediate refinancing needs are addressed.

The most pressing risk facing TSL is the approaching maturity of the Existing Facility on November 15, 2023 — now fewer than four months away. Failure to refinance or extend the Existing Facility by that date would result in all outstanding obligations (approximately $124,687,500) becoming immediately due and payable, which could trigger cross-default provisions in other TSL agreements and expose the Company's vessel collateral to enforcement proceedings. Addressing this maturity deadline must be TSL's highest priority.

We recommend a dual-track strategy: (i) immediately contacting existing syndicate members and other potential replacement arrangers to assess the feasibility of reconstituting the Proposed Facility or a comparable refinancing, and (ii) simultaneously engaging with Harborstone National Bank to negotiate a short-term maturity extension of the Existing Facility to provide the Company with adequate runway. Both workstreams should commence without delay.

II. BACKGROUND AND PROCEDURAL HISTORY

A. The Proposed Facility

TSL sought to refinance its Existing Facility — a $125,000,000 revolving credit facility provided by Harborstone National Bank — with a new, larger $150,000,000 senior secured revolving credit facility. The Existing Facility was entered into pursuant to a Credit Agreement dated November 15, 2018 (the "Harborstone Credit Agreement"), as amended by the First Amendment to Credit Agreement dated June 30, 2020 (the "First Amendment") and the Second Amendment to Credit Agreement dated March 1, 2022 (the "Second Amendment"). The Existing Facility was approaching the end of its five-year term, with a maturity date of November 15, 2023.

The Proposed Facility was intended not only to replace the Existing Facility but also to provide TSL with $25,000,000 of incremental liquidity beyond the existing commitment level. The additional capacity was earmarked for general corporate purposes and working capital, reflecting the Company's expanded fleet size and increased operating requirements since the Existing Facility was originally put in place in 2018.

The Proposed Facility was to be structured as follows:

Facility Type and Amount. The Proposed Facility was a senior secured revolving credit facility in an aggregate principal amount of $150,000,000. It included sublimits for standby and commercial letters of credit in an aggregate face amount of up to $20,000,000, and for swingline loans in an aggregate principal amount of up to $15,000,000. The letter of credit sublimit and swingline sublimit were to be part of, and not in addition to, the overall $150,000,000 commitment.

Governing Law and Jurisdiction. The Proposed Facility was to be governed by the laws of the State of New York, without regard to conflicts of law principles. The parties were to submit to the exclusive jurisdiction of the federal and state courts located in the Borough of Manhattan, City and State of New York.

Maturity. The maturity date was to be five years from the closing date. Based on the anticipated closing timeline, this would have resulted in a maturity in mid-2028, providing the Company with a significantly longer tenor than the remaining term of the Existing Facility.

Interest Rate. Borrowings under the Proposed Facility were to bear interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") — specifically, adjusted Term SOFR for interest periods of one, three, or six months, at the election of TSL — plus an applicable margin. The applicable margin was to be determined pursuant to a leverage ratio grid, ranging from 225 basis points at the lowest pricing tier (when the Company's consolidated net leverage ratio was at or below 2.50:1.00) to 325 basis points at the highest pricing tier (when the consolidated net leverage ratio exceeded 4.00:1.00). The transition from LIBOR to SOFR as the benchmark rate represented an update from the Existing Facility, which was originally structured on a LIBOR-based pricing framework.

Collateral Package. The Proposed Facility was to be secured by a comprehensive collateral package consisting of the following:

(i) First-priority ship mortgages on eighteen (18) designated vessels (the "Mortgaged Vessels"), with an aggregate appraised fair market value of approximately $780,000,000 as determined by Seastone Maritime Advisors Ltd. in appraisals delivered on July 10, 2023;

(ii) Assignment of earnings accounts maintained by the vessel-owning subsidiaries;

(iii) Assignment of hull & machinery insurance and protection & indemnity ("P&I") insurance for each Mortgaged Vessel;

(iv) Pledge of 100% of the equity interests in each vessel-owning subsidiary holding title to a Mortgaged Vessel; and

(v) Assignment of time charter contracts with remaining terms of twelve (12) months or more.

The credit agreement included a minimum collateral coverage ratio of 140% of outstanding facility obligations. At full draw ($150,000,000), this would require minimum collateral value of $210,000,000. Based on the Seastone appraisals, the collateral coverage ratio at full draw would have been approximately 520% ($780,000,000 / $150,000,000), providing significant headroom above the minimum threshold. Pinnacle Trust & Agency Services Inc. was proposed to act as Collateral Agent and Security Trustee, responsible for holding and administering the security interests on behalf of the lenders.

Financial Covenants. The Proposed Facility included the following financial covenants, tested quarterly:

(i) Maximum Consolidated Net Leverage Ratio: 4.50:1.00 during the first two years of the facility, stepping down to 4.00:1.00 commencing in Year 3 and continuing through maturity;

(ii) Minimum Consolidated Interest Coverage Ratio: 3.00:1.00 at all times;

(iii) Minimum Liquidity: $30,000,000 in unrestricted cash and cash equivalents and availability under revolving credit facilities at all times; and

(iv) Maximum Capital Expenditures: $80,000,000 per fiscal year, with a one-year carry-forward of unused amounts up to a maximum of $20,000,000.

Roles and Parties. Meridian Atlantic Bank N.A. was appointed as Sole Lead Arranger, Sole Bookrunner, and Administrative Agent. TSL was the borrower. The syndicate lenders, upon closing, would have consisted of MAB (retaining a $45,000,000 commitment), Nordkapp Maritime Finance AG ($40,000,000), Clearwater Commercial Lending LLC ($35,000,000), and Eastbourne Capital Partners LLP ($30,000,000).

B. Timeline of Key Events

The following chronology sets forth the key events in the negotiation and documentation of the Proposed Facility, from the initial request for proposals through MAB's withdrawal:

January 18, 2023: TSL, through its CFO Dimitrios Pantazis and General Counsel Aris Komnenidis, issued a request for proposals (the "RFP") to a shortlist of banks with active shipping finance practices, inviting them to submit proposals for the refinancing of the Existing Facility. The RFP was distributed to approximately six financial institutions, including Meridian Atlantic, Nordkapp Maritime Finance AG, and several other international banks with shipping lending capabilities.

February 14, 2023: Following evaluation of the proposals received in response to the RFP, TSL selected Meridian Atlantic Bank N.A. as the lead arranger for the Proposed Facility. The Mandate and Fee Letter was executed on this date by Elena Vassiliou on behalf of TSL and by Marcus Whitfield on behalf of MAB. The Mandate Letter set forth the principal terms of MAB's engagement, including the scope of its duties, the fee arrangements, and the conditions to its obligations.

March 10, 2023: Calderwood & Harkness LLP was formally engaged as legal counsel to TSL in connection with the Proposed Facility. An engagement letter was executed by Aris Komnenidis on behalf of TSL and by Ian Blackwood on behalf of C&H. The matter was formally opened on March 13, 2023 under Matter No. 1044-00002. The C&H deal team was led by Ian Blackwood (Partner, Banking & Finance), with Sophie Tremblay (Senior Associate, Banking & Finance) serving as the primary day-to-day contact.

March 20, 2023: MAB, through its lender's counsel Whitmore, Jennings & Alcott LLP ("WJA"), circulated an initial term sheet reflecting the proposed terms of the Proposed Facility. C&H delivered its markup of the term sheet on March 27, 2023, following internal review with TSL management. The markup addressed, among other things, the applicable margin pricing grid, the financial covenant levels, the scope of the negative covenants (particularly with respect to permitted indebtedness and permitted liens), and certain conditions precedent to closing.

April 5, 2023 through July 3, 2023: The parties engaged in an intensive documentation process spanning approximately three months. WJA circulated three successive drafts of the credit agreement: the initial draft on April 5, 2023, a revised draft reflecting C&H's initial comments on May 1, 2023, and a further revised draft on June 12, 2023. C&H delivered comprehensive markups in response to each draft. An issues list identifying twenty-eight (28) open points was circulated by C&H on May 15, 2023, and the parties held a negotiation call focused on financial covenant levels and definitions on May 22, 2023. Draft security documents — including the form of first preferred ship mortgage, the share pledge agreement, the assignment of earnings agreement, and the assignment of insurances agreement — were circulated by WJA on June 16, 2023, and marked up by C&H on June 23, 2023. The near-final credit agreement was circulated by WJA on July 3, 2023, accompanied by a comprehensive closing checklist identifying seventy-eight (78) items required for closing.

July 10, 2023: Seastone Maritime Advisors Ltd. delivered vessel appraisals for all eighteen Mortgaged Vessels. The appraisals were conducted under the direction of lead appraiser Duncan Fairweather and reflected an aggregate fair market value of approximately $780,000,000 as of the date of appraisal. The appraisals were a condition precedent to closing and a key element of the lenders' credit analysis.

July 14, 2023: All three syndicate lenders confirmed their respective commitments in writing:

• Nordkapp Maritime Finance AG: $40,000,000 commitment (contact: Anders Dalmqvist, Managing Director, Shipping Lending);

• Clearwater Commercial Lending LLC: $35,000,000 commitment (contact: Rosa Menendez, Senior Vice President); and

• Eastbourne Capital Partners LLP: $30,000,000 commitment (contact: Gavin Holt, Partner, Maritime Credit).

Together with MAB's retained commitment of $45,000,000, total commitments of $150,000,000 were confirmed, representing a fully subscribed syndication. The successful completion of syndication was itself a significant milestone, given the challenging market environment for shipping finance.

July 18, 2023: Meridian Atlantic Bank N.A. publicly announced its strategic decision to wind down its Shipping & Maritime Finance Division globally, effective immediately. The announcement indicated that the Bank would cease all new shipping commitments and commence an orderly wind-down of its existing maritime lending portfolio. The decision was communicated internally by Marcus Whitfield, Head of the Shipping Finance Division, who indicated that the decision had been taken by MAB's Executive Committee as part of a broader strategic review of the Bank's lending verticals.

July 19, 2023: Catherine Hsiang, MAB Relationship Manager, formally notified TSL of the Bank's withdrawal from the mandate for the Proposed Facility. The notification was delivered by email and confirmed by telephone. Ms. Hsiang indicated that the decision was final and applied to all pending shipping finance mandates globally, not specifically to TSL. She expressed regret over the disruption and offered to facilitate introductions to other financial institutions, though no specific replacement candidates were identified.

C. Status of Documentation at Withdrawal

At the time of MAB's withdrawal, the documentation for the Proposed Facility was at an advanced stage, but no documents had been executed and no conditions precedent to closing had been formally satisfied. The status of the principal workstreams was as follows:

Credit Agreement. The near-final clean draft of the credit agreement was circulated by WJA on July 3, 2023. All material terms had been agreed between the parties, including the financial covenants, the negative covenants, the representations and warranties, the conditions precedent, and the events of default. A limited number of conforming changes and cross-referencing corrections remained to be addressed in the execution version, but no substantive issues were outstanding. No execution version was signed.

Security Documents. The forms of security documents — including the first preferred ship mortgage, the share pledge agreement, the assignment of earnings agreement, and the assignment of insurances agreement — were in an advanced markup stage. C&H had delivered its markup of all forms on June 23, 2023. WJA had not yet circulated revised drafts reflecting C&H's comments, and accordingly the security documents were not in agreed form. The security documents would have required execution by the relevant vessel-owning subsidiaries of TSL, notarization (in the case of certain share pledges), and registration with the relevant ship registries and corporate registries.

Closing Conditions. A seventy-eight-item closing checklist had been prepared by WJA and circulated on July 3, 2023. All items on the checklist were marked as "pending" or "in progress." No conditions precedent to closing — including delivery of executed documents, officer's certificates, legal opinions, insurance certificates, corporate authorizations, or evidence of regulatory compliance — had been formally satisfied.

Legal Opinions. Draft outlines of the legal opinions had been prepared but neither opinion had been finalized or delivered. Calderwood & Harkness had prepared a draft outline of its New York law legal opinion (dated July 1, 2023), and Pavlopoulos & Drakos Law Firm, Greek counsel to TSL, had prepared a draft outline of its Greek law legal opinion (dated June 30, 2023) covering matters of Greek corporate law, the due authorization and execution of documents by Greek entities, and the enforceability of Greek-law security documents.

Corporate Authorizations. A draft secretary's certificate for TSL was prepared on June 28, 2023, but the board resolutions authorizing the entry into the Proposed Facility and the execution of the credit agreement and related documents had not yet been adopted. The expectation had been that the board would adopt the necessary resolutions in the period immediately preceding closing, once all documentation had been finalized.

Funds Flow. A draft closing funds flow memorandum was prepared on July 6, 2023, reflecting an initial borrowing of $125,000,000 under the Proposed Facility, a payoff of the Harborstone Existing Facility in the amount of $124,687,500, payment of fees in the amount of $825,000, and a net shortfall of $512,500 to be funded by TSL from available cash. The funds flow memorandum was never finalized or agreed by the parties.

In summary, while the transaction was at an advanced stage of preparation, the critical legal threshold of execution had not been crossed. No documents were signed. No borrowing occurred. No lender made any advance of funds. This status has significant implications for the analysis of TSL's legal options, as discussed in Section III below.

III. ANALYSIS OF MERIDIAN ATLANTIC'S RIGHTS TO WITHDRAW UNDER THE MANDATE LETTER

A. Terms of the Mandate and Fee Letter

The legal relationship between TSL and MAB with respect to the Proposed Facility is governed principally by the Mandate and Fee Letter dated February 14, 2023 (the "Mandate Letter"), executed between TSL and Meridian Atlantic Bank N.A. The Mandate Letter is a New York law-governed agreement setting forth the terms of MAB's appointment as Sole Lead Arranger, Sole Bookrunner, and Administrative Agent for the Proposed Facility.

Mandate letters in the leveraged and structured finance markets — and in the shipping finance market in particular — are highly standardized instruments that serve a specific function in the transaction lifecycle. They are executed at the outset of the engagement, typically before detailed documentation commences, and they define the scope of the arranger's duties, the fee arrangements, and the conditions under which the arranger is obligated (or not obligated) to perform. Critically, mandate letters in the shipping finance market are customarily structured on a "best efforts" basis rather than as firm underwriting commitments. This distinction is of central importance to the analysis of MAB's rights to withdraw.

Under a "best efforts" mandate, the arranger agrees to use its commercially reasonable efforts to arrange and syndicate the facility on the terms described in the mandate letter, but does not guarantee that the facility will close or that the syndication will be successful. The arranger does not assume the risk of funding in the event that syndication is not completed on satisfactory terms. This stands in contrast to a "firm commitment" or "underwritten" mandate, in which the arranger commits to fund the entire facility (or a specified portion thereof) regardless of the outcome of the syndication process, subject to limited conditions. Firm commitments are more commonly encountered in the leveraged acquisition finance market and carry significantly higher fees to compensate the arranger for the underwriting risk assumed.

The Mandate Letter for the Proposed Facility, consistent with market practice for shipping finance transactions, was structured as a "best efforts" arrangement. The following provisions of the Mandate Letter are relevant to the analysis of MAB's withdrawal:

(i) Syndication Obligation: MAB agreed to use "commercially reasonable efforts" to arrange and syndicate the Proposed Facility among a group of lenders acceptable to TSL and MAB on the terms set forth in the Mandate Letter and the attached term sheet. The Mandate Letter did not contain a firm commitment to fund.

(ii) Market Flex Provisions: The Mandate Letter contained standard market flex provisions permitting MAB to adjust the pricing, structure, and terms of the Proposed Facility as MAB reasonably determined to be necessary or advisable to ensure successful syndication. These provisions gave MAB significant discretion to alter the economics and terms of the transaction.

(iii) Conditions to MAB's Obligations: MAB's obligations under the Mandate Letter were expressly conditioned on, among other things: (a) satisfactory completion of due diligence (including review of TSL's financial condition, fleet composition, charter portfolio, and legal structure); (b) the absence of any "Material Adverse Change" (as defined in the Mandate Letter) in the business, condition, operations, or prospects of TSL; (c) the absence of any "Market Disruption" (as defined in the Mandate Letter) that, in MAB's reasonable judgment, would materially adversely affect the syndication of the Proposed Facility; and (d) the preparation of documentation in form and substance satisfactory to MAB and its counsel.

(iv) Termination/Withdrawal Provisions: The Mandate Letter contained provisions addressing the circumstances under which the mandate could be terminated. While we are continuing to review the specific language of the termination provisions, mandate letters of this type typically provide for termination by the arranger upon the occurrence of specified events (including a Material Adverse Change, a Market Disruption, or the failure to satisfy conditions within a specified timeframe) and may also include a general right of termination by either party upon written notice. The Mandate Letter did not, to our preliminary review, contain an express prohibition on withdrawal by the arranger based on internal strategic considerations.

In addition to the express provisions of the Mandate Letter, every contract governed by New York law carries an implied covenant of good faith and fair dealing, which imposes on each party a duty not to act in a manner that would deprive the other party of the benefit of the contract. The scope and application of the implied covenant in the context of the Mandate Letter is discussed in Section III.B below.

B. Legal Analysis: Was MAB's Withdrawal Permissible?

The central question is whether MAB's decision to withdraw from the mandate — motivated not by any credit deterioration of TSL or any market disruption specific to this transaction, but by an internal strategic decision to exit the shipping finance business entirely — was permissible under the Mandate Letter and applicable law.

Nature of MAB's Decision. MAB's July 18, 2023 announcement to exit shipping finance constitutes a strategic business decision made at the corporate level, reflecting a reallocation of capital and resources away from the maritime lending sector. The decision was not precipitated by any deterioration in TSL's creditworthiness, any adverse change in TSL's business or financial condition, any disruption in the syndicated lending market, or any specific difficulty in the syndication of the Proposed Facility. To the contrary, syndication had been completed successfully, with all three target syndicate banks having confirmed their commitments just four days before the announcement. TSL's financial profile remained strong throughout the mandate period, and no event of default or covenant breach had occurred or was anticipated under the Existing Facility or any other agreement.

The "Best Efforts" Standard. Under New York law, a "best efforts" obligation requires the promisor to act with diligence and in good faith, taking all reasonable steps to fulfill the obligation, but does not impose an absolute duty to achieve a particular result. Courts have generally interpreted "best efforts" and "commercially reasonable efforts" obligations as requiring the promisor to pursue the objective with the level of effort that a reasonable person in the same position would undertake, considering all relevant circumstances, but not to the point of self-destruction or financial ruin. See, e.g., Bloor v. Falstaff Brewing Corp., 601 F.2d 609 (2d Cir. 1979); Tibbetts Contracting Corp. v. O & E Contracting Co., 15 N.Y.3d 324 (2010).

In the context of a mandate letter structured on a "best efforts" basis, courts have generally interpreted the arranger's obligation as requiring the arranger to use commercially reasonable efforts to syndicate and arrange the facility on the agreed terms, but not as compelling the arranger to fund the facility out of its own resources or to close the transaction in the face of a genuine inability or unwillingness to proceed. The distinction between a "best efforts" mandate and a "firm commitment" exists precisely to allocate the risk of non-completion — under a "best efforts" structure, the borrower bears the risk that the arranger may be unable or unwilling to close, while under a firm commitment, the arranger bears that risk.

Application to MAB's Withdrawal. MAB's decision to wind down its entire Shipping & Maritime Finance Division globally is broader and more fundamental than a transaction-specific exercise of market flex or a Material Adverse Change-based termination. It reflects a wholesale strategic reorientation of the Bank's business, eliminating the division that would have originated, administered, and serviced the Proposed Facility. In this respect, it is arguably different from the types of events contemplated by the specific conditions and termination provisions of the Mandate Letter, which are generally designed to address transaction-specific risks rather than the arranger's own strategic choices.

However, several factors weigh against a finding that MAB's withdrawal constituted a breach of the Mandate Letter:

(i) The Mandate Letter was structured on a "best efforts" basis and did not contain a firm commitment to fund. MAB retained discretion — subject to the duty of good faith — in determining whether and how to proceed with the syndication and arrangement of the facility.

(ii) The Mandate Letter likely does not contain an affirmative obligation requiring MAB to maintain a shipping finance division, to retain any particular personnel, or to proceed to closing irrespective of internal strategic changes. Mandate letters are not perpetual commitments; they are limited-purpose engagement instruments.

(iii) No execution version of the credit agreement was signed. No conditions precedent were satisfied. No funds were advanced. The transaction had not yet ripened into a binding lending commitment on the part of MAB.

(iv) MAB's decision applied globally to all pending shipping mandates, not selectively to TSL. This undercuts any argument that the withdrawal was targeted at TSL or motivated by bad faith with respect to this particular transaction.

Implied Covenant of Good Faith and Fair Dealing. Notwithstanding the foregoing, TSL has a potentially meritorious argument — though its outcome is uncertain — based on the implied covenant of good faith and fair dealing. Under New York law, the implied covenant prohibits a party from acting in a manner that would destroy the right of the other party to receive the fruits of the contract. See Dalton v. Educational Testing Service, 87 N.Y.2d 384 (1995). TSL could argue that MAB's withdrawal, coming after months of active engagement and after syndication had been successfully completed, deprived TSL of the benefit of the Mandate Letter — namely, the expectation that MAB would use its best efforts to bring the Proposed Facility to closing.

However, New York courts have been reluctant to use the implied covenant to override or supplement express contractual provisions. The implied covenant is not an independent source of obligations; it serves only to ensure that the express terms of the contract are performed in good faith. Where the contract expressly permits termination or contemplates circumstances under which the arranger's obligations may cease, the implied covenant cannot be invoked to impose additional limitations not found in the contract's express language. See, e.g., Harris v. Provident Life & Accident Insurance Co., 310 F.3d 73 (2d Cir. 2002); Moran v. Erk, 11 N.Y.3d 452 (2008).

Preliminary Conclusion. While MAB's withdrawal is highly unusual and deeply disruptive — and while there are reasonable arguments that it was inconsistent with the spirit, if not the letter, of the Mandate Letter — the absence of a firm commitment, the "best efforts" nature of the engagement, the breadth of the conditions to MAB's obligations, and the fact that no documents were executed collectively make it difficult for TSL to compel MAB to proceed or to recover substantial damages for failure to close. The legal landscape in this area is not entirely settled, and a more detailed analysis of the specific language of the Mandate Letter's termination provisions and the implied covenant of good faith is warranted if the Board determines to pursue claims against MAB. However, as a practical matter, litigation against MAB would not resolve TSL's immediate refinancing needs and should be viewed as a secondary consideration to the critical priority of addressing the November 15, 2023 maturity of the Existing Facility.

C. Potential Claims Against MAB

If TSL elects to pursue legal claims against MAB, the following causes of action merit consideration:

1. Breach of Contract. TSL could assert that MAB breached its obligations under the Mandate Letter by failing to use commercially reasonable efforts to arrange and syndicate the Proposed Facility and by withdrawing from the mandate before the transaction was completed. However, as discussed above, the prospects for this claim are limited given the "best efforts" structure of the Mandate Letter. MAB can be expected to argue that its internal decision to exit shipping finance removed its ability to proceed with the mandate, and that the Mandate Letter did not obligate it to maintain its shipping finance operations or to close the transaction at all costs. MAB may further argue that the conditions to its obligations — including conditions relating to satisfactory documentation and the exercise of its market flex rights — were within its discretion and had not been fully satisfied at the time of withdrawal.

2. Breach of Implied Covenant of Good Faith and Fair Dealing. TSL has a stronger, though still uncertain, argument that MAB's withdrawal breached the implied covenant of good faith and fair dealing. The core of this argument would be that MAB's decision to exit shipping finance was arbitrary and unrelated to the creditworthiness of this transaction, and that by withdrawing after five months of active engagement — and just days after syndication had been successfully completed — MAB acted in bad faith by depriving TSL of the reasonable expectation that the Proposed Facility would be brought to closing. TSL could point to the substantial resources it invested in reliance on MAB's commitment, the timing of the withdrawal (immediately after the syndication milestone), and the absence of any transaction-specific justification for the withdrawal.

The countervailing arguments are those discussed in Section III.B above: New York courts have been reluctant to use the implied covenant to override express contractual provisions, and MAB would argue that the Mandate Letter's express terms — including the "best efforts" standard and the various conditions to its obligations — did not guarantee closing and preserved MAB's discretion to terminate the engagement.

3. Promissory Estoppel / Detrimental Reliance. TSL could assert a claim for promissory estoppel, arguing that MAB made a clear and unambiguous promise (through the Mandate Letter and its conduct throughout the engagement) to arrange the Proposed Facility, that TSL relied on this promise to its detriment by incurring substantial costs, and that injustice can be avoided only by enforcement of the promise. TSL's costs incurred in reliance on the mandate include:

• Calderwood & Harkness legal fees billed through the closure of the active documentation workstream: $412,850;

• Out-of-pocket disbursements (including filing fees, search fees, courier charges, and travel expenses): $18,340;

• Internal management time devoted to the transaction by TSL's executive team, in-house legal department, and finance team over the five-month period — a significant opportunity cost that is difficult to quantify precisely but is substantial;

• Vessel appraisal costs paid to Seastone Maritime Advisors Ltd.;

• Costs incurred by Pavlopoulos & Drakos Law Firm in connection with Greek law advice and opinion preparation; and

• Potential incremental costs associated with the need to pursue alternative refinancing on an expedited basis.

A promissory estoppel claim would require TSL to demonstrate that its reliance on MAB's promise was reasonable and foreseeable. While TSL has strong arguments on this point — the Mandate Letter was a formal written agreement, and TSL's reliance was both reasonable and foreseeable — the claim is subject to the counterargument that TSL, as a sophisticated commercial party with experienced legal counsel, was aware of the "best efforts" nature of the mandate and the risk that the facility might not close.

4. Practical Considerations. Litigation against MAB would be time-consuming, costly, and uncertain in outcome. The filing of a lawsuit could also complicate TSL's ongoing relationships with the financial community and potentially discourage replacement arranger candidates from stepping into the transaction. Moreover, litigation would not address TSL's immediate need to refinance or extend the Existing Facility before November 15, 2023.

We therefore recommend the following approach: (i) send a formal written reservation of rights letter to MAB immediately, preserving all claims under the Mandate Letter and applicable law; (ii) defer a definitive decision on whether to pursue litigation until the Company's refinancing situation is resolved and the Board can evaluate the matter with the benefit of additional time and information; and (iii) if the Board elects to pursue claims, retain a litigation partner at Calderwood & Harkness or outside litigation counsel with experience in bank mandate disputes to conduct a comprehensive evaluation and develop a litigation strategy.

IV. TSL'S RIGHTS TO REFUND OF FEES PAID UNDER THE MANDATE LETTER

A. Fees Paid to MAB

The Mandate Letter provided for the following fee arrangements:

Upfront/Arranging Fee. The Mandate Letter provided for an upfront arranging fee of $750,000, calculated as 0.50% of the $150,000,000 facility amount. The payment terms for this fee must be analyzed carefully to determine whether TSL has made any payment that is now subject to refund. In the shipping finance market, upfront arranging fees are typically structured as payable at or upon closing of the credit facility, with the amount being deducted from the initial advance under the facility. Under this structure, if closing does not occur, the fee does not become payable and no refund issue arises. However, some mandate letters provide for a portion of the arranging fee — sometimes characterized as a "work fee," "commitment deposit," or "initial fee" — to be payable upon execution of the mandate letter or at specified milestones during the documentation process. Whether any such advance payment was made by TSL requires verification against the specific terms of the Mandate Letter and TSL's payment records.

Administrative Agent Fee. The Mandate Letter provided for an annual administrative agent fee of $75,000, payable to MAB in its capacity as Administrative Agent under the Proposed Facility. This fee was to commence upon closing of the facility and was payable annually in advance. Since closing did not occur, no administrative agent fee became payable, and no refund issue arises with respect to this fee.

Expense Reimbursement. Mandate letters customarily provide for the borrower to reimburse the arranger's reasonable out-of-pocket expenses incurred in connection with the syndication and documentation of the facility, including the fees and expenses of the arranger's legal counsel (in this case, Whitmore, Jennings & Alcott LLP). TSL may have advanced expense reimbursement payments to MAB during the documentation process. The Mandate Letter should be reviewed to determine whether any expense reimbursement amounts are outstanding and whether TSL has the right to recover any portion of such amounts in light of MAB's withdrawal.

B. Refund Provisions

The availability of a refund depends on the specific language of the Mandate Letter's fee provisions. Several scenarios are possible:

Scenario 1: Fees Payable at Closing. If the arranging fee was structured as payable entirely at closing, and closing did not occur, then no fee payment obligation arose and no refund is needed. TSL would have no obligation to pay the $750,000 arranging fee, and MAB would have no right to demand payment.

Scenario 2: Advance Payment with Non-Refundable Clause. If any portion of the fee was advanced to MAB at the time of mandate execution or at an interim milestone, and the Mandate Letter provides that fees are non-refundable once paid, TSL's ability to reclaim the advance would be limited. Non-refundable fee provisions are common in mandate letters and are generally enforceable under New York law, as they compensate the arranger for its commitment of time and resources during the arrangement process. However, a non-refundable fee provision might be challenged if TSL can demonstrate that MAB's withdrawal was a breach of contract or was in bad faith, as enforcing the non-refundable provision in such circumstances could be viewed as unjust enrichment.

Scenario 3: Advance Payment with Refund Mechanism. If any portion of the fee was advanced and the Mandate Letter provides for a refund in whole or in part in the event of termination or non-closing, TSL would have a contractual right to demand the refund in accordance with the Mandate Letter's terms.

Expense Reimbursement. Any work fee or expense reimbursement advanced to MAB should be analyzed to determine whether a partial refund is available based on the work actually performed by MAB and its counsel through the date of withdrawal. If MAB has received expense reimbursement in excess of the actual costs incurred through July 19, 2023, TSL may be entitled to recover the excess. Conversely, MAB may assert a right to additional reimbursement for expenses incurred through the date of withdrawal.

Recommendation. Calderwood & Harkness will review the specific fee payment provisions of the Mandate Letter in detail and advise TSL on (i) whether any fee payments have been made to MAB, (ii) whether TSL has the right to a refund of any such payments, and (iii) the quantum of any refund claim. We will coordinate with Dimitrios Pantazis and TSL's finance team to verify the payment history. We recommend that, in the interim, TSL not make any additional payments to MAB under the Mandate Letter until this analysis is completed and that the reservation of rights letter to MAB expressly reserve TSL's right to seek a refund of any fees or expenses advanced.

V. OPTIONS FOR REPLACEMENT ARRANGER

A. Overview of the Challenge

Securing a replacement arranger for the Proposed Facility presents a significant practical challenge, compounded by adverse market dynamics and severe time pressure.

Market Context. The global shipping finance market has been undergoing a structural contraction over the past decade. Several major international banks have reduced or entirely exited their maritime lending operations, citing concerns about regulatory capital requirements, the cyclical volatility of the shipping sector, environmental and sustainability considerations, and strategic portfolio rebalancing. MAB's exit from shipping finance is emblematic of this broader trend. The number of financial institutions with the capacity, expertise, and willingness to act as lead arranger for a $150,000,000 shipping finance facility has diminished significantly. While certain specialist shipping banks, alternative lenders, and export credit agencies continue to be active in the sector, the pool of potential replacement arrangers is materially smaller than it would have been even five years ago.

Scale and Complexity. The Proposed Facility required a lead arranger capable of taking an initial hold of at least $45,000,000 and managing the syndication process to distribute the remaining commitment to a group of institutional lenders. Not every bank with a shipping lending capability has the balance sheet capacity, the credit appetite, or the syndication infrastructure to serve in this role. The replacement arranger would also need to assume the administrative agent function, which requires operational capacity to manage the day-to-day administration of the facility, including drawdown mechanics, interest rate calculations, compliance monitoring, and collateral management.

Timeline Pressure. The most critical constraint is time. The Existing Facility with Harborstone National Bank matures on November 15, 2023 — less than four months from the date of this memorandum. Securing a new arranger, negotiating a mandate letter, re-papering the transaction (or adapting the existing documentation), conducting the replacement arranger's credit review and approval process, completing syndication, and closing would realistically take three to six months, and possibly longer. This timeline extends well past the November 15, 2023 maturity of the Existing Facility, meaning that a replacement arranger strategy alone is insufficient to address the immediate maturity risk. A replacement arranger must be pursued in parallel with a Harborstone extension, as discussed in Section VII below.

B. Potential Replacement Arrangers

Calderwood & Harkness has identified the following institutions as potential candidates for the replacement arranger role. We recommend that TSL initiate outreach to each of these institutions immediately.

1. Nordkapp Maritime Finance AG. Nordkapp was the largest syndicate lender in the Proposed Facility, with a confirmed commitment of $40,000,000. The primary contact is Anders Dalmqvist, Managing Director, Shipping Lending, based in Oslo. Nordkapp is a well-established European maritime finance institution with deep expertise in the shipping sector and an existing relationship with the Proposed Facility. Having completed its credit analysis and committed to a $40,000,000 participation, Nordkapp is already familiar with TSL's credit profile, fleet, and the structure of the transaction. In principle, Nordkapp may be the most logical candidate to step up to the lead arranger role. However, stepping up from a $40,000,000 syndicate commitment to a lead arranger role with a $45,000,000 or greater hold position and responsibility for syndication management and administrative agent functions is a materially different undertaking. Nordkapp would need to secure internal credit approval for the enhanced role and increased exposure, and would expect to receive the arranging fee and administrative agent fee previously allocated to MAB. Calderwood & Harkness recommends that TSL initiate contact with Anders Dalmqvist immediately to gauge Nordkapp's willingness and capacity to assume this role.

2. Clearwater Commercial Lending LLC. Clearwater was committed to a $35,000,000 participation in the syndicate. The primary contact is Rosa Menendez, Senior Vice President, based in Miami. Clearwater is principally a commercial lending platform with a diversified portfolio; while it has been active in certain shipping-adjacent lending, it may lack the specialized infrastructure for lead arranger syndication in the shipping finance sector, including the operational capacity to serve as administrative agent for a multi-lender shipping facility. We recommend that TSL explore this option, but we view the prospects as uncertain given the specialized nature of the lead arranger role.

3. Eastbourne Capital Partners LLP. Eastbourne was committed to the smallest participation in the syndicate at $30,000,000. The primary contact is Gavin Holt, Partner, Maritime Credit, based in London. As a UK-based LLP, Eastbourne has been an active participant in the European shipping finance market, but its relatively modest commitment size and firm structure suggest that it may not have the capacity to take on a lead arranger role for a $150,000,000 facility. Nonetheless, TSL should contact Eastbourne to discuss the situation and assess any flexibility in its position.

4. Iniaia Merchant Bank SA. iniaia is a shipping-focused merchant bank that TSL did not approach during the original RFP process in January 2023. Based in Athens and Geneva, iniaia has been active in the Greek shipping market and has a reputation for providing tailored financing solutions to mid-size and large shipping companies. Iniaia could be approached as a potential replacement arranger, though it may offer less favorable pricing terms and may prefer a smaller facility size than the $150,000,000 originally contemplated. TSL should be prepared for the possibility that iniaia would seek to restructure the transaction to reflect its own credit parameters and market positioning.

5. Baltic Strait Capital GmbH. Baltic Strait Capital is a German-based maritime finance institution headquartered in Hamburg, with a well-established presence in European shipping lending. Baltic Strait has historically maintained an appetite for Greek shipping credits and may be a viable candidate for the lead arranger role. TSL has not previously had a lending relationship with Baltic Strait, and accordingly there would be a more extensive familiarization and credit evaluation process required. However, given the limited pool of qualified candidates, outreach to Baltic Strait is warranted.

Note on Syndicate Commitments. An important caveat relates to the status of the existing syndicate commitments from Nordkapp, Clearwater, and Eastbourne. These commitments were made in the context of a specific transaction structure in which MAB served as lead arranger and administrative agent. It is highly likely that the commitment letters from each syndicate lender were conditioned on MAB's participation in those roles. In the absence of MAB, the syndicate commitments may lapse automatically, or the syndicate lenders may elect to withdraw or renegotiate their commitments. TSL should seek to confirm the continued interest of each syndicate lender as quickly as possible, while acknowledging that formal re-commitment may require the identification and appointment of a replacement arranger.

C. Practical Considerations

Even if a replacement arranger is identified and willing to proceed, several practical challenges must be addressed:

Re-Documentation. The replacement arranger would require a new mandate letter to be negotiated and executed, reflecting the terms of its engagement (including fees, syndication strategy, conditions, and market flex provisions). The credit agreement, while in near-final form, was drafted by WJA as counsel to MAB and the lenders. The replacement arranger and its counsel — which may be WJA (if WJA is willing to continue) or a different law firm — will likely require revisions to the credit agreement and security documents to reflect the replacement arranger's credit policies, documentation standards, and institutional requirements. This re-documentation process would not start from scratch, as the existing documentation can serve as a strong starting point, but it would add time and cost to the transaction.

Credit Approval. The replacement arranger would need to conduct its own internal credit analysis and obtain approval from its credit committee before taking on the lead arranger role. Depending on the institution, this process could take several weeks to several months.

Syndication. If the existing syndicate commitments lapse or are renegotiated, the replacement arranger may need to reconstitute the syndicate, which would add further time to the process.

Timing. Based on our experience with comparable transactions, the realistic timeline for a replacement arrangement — encompassing mandate negotiation, credit approval, documentation, syndication, and closing — would be three to six months from the appointment of a replacement arranger. This means that even under the most optimistic scenario, closing of the replacement facility would not occur until the fourth quarter of 2023 at the earliest, and more likely in the first quarter of 2024. This timeline extends well past the November 15, 2023 maturity of the Existing Facility.

Recommendation. Calderwood & Harkness strongly recommends that TSL pursue replacement arranger outreach as an important medium-term workstream, but that this effort be conducted in parallel with — and not as a substitute for — the negotiation of a Harborstone extension, as discussed in Section VII below. The Harborstone extension is the most efficient and time-effective means of addressing the immediate maturity risk.

VI. IMPLICATIONS FOR HARBORSTONE RCF MATURITY

A. The Existing Facility

The Existing Facility is a $125,000,000 revolving credit facility provided by Harborstone National Bank, pursuant to the Credit Agreement dated November 15, 2018, as amended by the First Amendment dated June 30, 2020 and the Second Amendment dated March 1, 2022 (collectively, the "Harborstone Credit Agreement"). Harborstone National Bank serves as both the administrative agent and the sole lender under the Existing Facility. The primary relationship contact at Harborstone is Philip Rennert, Director, Structured Shipping Finance, located at 350 Park Avenue, 20th Floor, New York, NY 10022.

The Existing Facility has a stated maturity date of November 15, 2023. As of the date of this memorandum, that maturity date is approximately 114 days away. The Proposed Facility was designed to refinance the Existing Facility in full before this maturity date. With MAB's withdrawal, the path to a timely refinancing has been severely disrupted, and the November 15, 2023 maturity has become the most critical issue facing TSL.

B. Consequences of Non-Refinancing

If TSL is unable to refinance or extend the Existing Facility on or before November 15, 2023, the consequences would be severe and far-reaching:

Maturity Default. All outstanding obligations under the Harborstone Credit Agreement — including principal, accrued and unpaid interest, and any other amounts due — would become due and payable on November 15, 2023. Based on the draft closing funds flow memorandum prepared on July 6, 2023 in connection with the Proposed Facility, the outstanding principal under the Existing Facility was approximately $124,375,000. Accrued interest was approximately $312,500, bringing the total estimated payoff amount to approximately $124,687,500. Failure to repay this amount in full at maturity would constitute an event of default under the Harborstone Credit Agreement.

Cross-Default Provisions. An event of default under the Harborstone Credit Agreement could trigger cross-default provisions in other agreements to which TSL or its subsidiaries are parties, including any hedging agreements, vessel charter party agreements with default termination provisions, or other financial obligations. A cascading series of defaults could have a destabilizing effect on TSL's operations and financial position.

Enforcement Against Collateral. Following an event of default, Harborstone would be entitled to exercise its remedies under the Harborstone Credit Agreement and the associated security documents, including foreclosure on vessel mortgages, enforcement of share pledges over vessel-owning subsidiaries, and seizure of earnings accounts. While Harborstone may choose not to immediately pursue enforcement remedies — particularly given TSL's strong financial profile and the value of the collateral — the legal right to do so would exist, and the mere possibility of enforcement action could disrupt TSL's commercial operations, insurance arrangements, and relationships with charterers and counterparties.

Reputational Impact. A maturity default, even if ultimately resolved without enforcement, could damage TSL's reputation in the financial community and complicate future financing efforts. Counterparties, insurance providers, and charterers may view a default as a signal of financial distress, even if the underlying cause is a procedural gap resulting from MAB's withdrawal rather than any deterioration in TSL's creditworthiness.

This is, without question, the most critical and time-sensitive issue facing TSL. All other considerations — including the potential claims against MAB, the search for a replacement arranger, and the recovery of fees — are secondary to the imperative of ensuring that the Existing Facility is either refinanced or extended before November 15, 2023.

C. TSL's Financial Capacity

It is important to emphasize that the challenge facing TSL is one of market access and timing, not of creditworthiness. TSL's financial profile remains robust:

• Revenue: TSL's consolidated revenue for fiscal year 2022 was approximately $620,000,000, reflecting the strong charter rate environment in both the dry bulk and tanker sectors.

• EBITDA: Consolidated EBITDA for fiscal year 2022 was approximately $145,000,000, providing substantial cash flow to service debt obligations. At the existing debt level of approximately $124,375,000, the Company's net leverage ratio is well within the proposed financial covenants.

• Fleet Value: TSL operates a fleet of forty (40) vessels, comprising twenty-eight (28) dry bulk carriers and twelve (12) tankers, with an estimated total fleet value of approximately $1.2 billion. Of these, eighteen vessels were designated as Mortgaged Vessels under the Proposed Facility, with an appraised value of approximately $780,000,000. The remaining twenty-two vessels, with an estimated value of approximately $420,000,000, are unencumbered and represent additional potential collateral capacity.

• Debt Capacity: Based on the Company's EBITDA, fleet value, and debt levels, TSL's credit profile should comfortably support either a replacement refinancing at the $150,000,000 level or an extension of the Existing Facility. The Company is well within the financial covenant levels proposed for the Proposed Facility.

In short, TSL's fundamental creditworthiness is not in question. The Company's challenge is a procedural one — finding a replacement lender or securing an extension within a compressed timeframe — rather than a substantive credit issue. This distinction should be communicated clearly to Harborstone and to any potential replacement arranger, supported by updated financial information as appropriate.

VII. AMENDMENT/EXTENSION OF EXISTING HARBORSTONE FACILITY AS INTERIM MEASURE

A. Proposed Approach

Given the severe timeline pressure created by MAB's withdrawal and the realistic three-to-six-month timeline for securing and closing a replacement financing, Calderwood & Harkness recommends that TSL immediately approach Harborstone National Bank to negotiate a short-term maturity extension of the Existing Facility.

The objective of the extension would be to push the maturity date of the Existing Facility from November 15, 2023 to a date that provides TSL with adequate time to complete a permanent refinancing — ideally six to twelve months beyond the current maturity, i.e., a new maturity date of May 15, 2024 or November 15, 2024. This would transform the November 15, 2023 deadline from an imminent crisis into a manageable transition, allowing TSL to pursue replacement arranger outreach and refinancing on a realistic timeline.

Initial contact with Philip Rennert, Direc

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL — PREPARED IN CONNECTION WITH LEGAL REPRESENTATION
CALDERWOOD & HARKNESS LLP 425 Park Avenue, New York, NY 10022 8 Vasilissis Sofias Avenue, Athens 106 74, Greece
July 24, 2023
MEMORANDUM
TO: The Board of Directors of Thalassa Shipping & Logistics SA
Nikolaos Karadimitriou, Founder & Chairman Elena Vassiliou, Chief Executive Officer Dimitrios Pantazis, Chief Financial Officer Aris Komnenidis, General Counsel
FROM: Ian Blackwood, Partner, Banking & Finance, Calderwood & Harkness LLP Sophie Tremblay, Senior Associate, Banking & Finance, Calderwood & Harkness LLP
RE: Meridian Atlantic Bank N.A. — Withdrawal from Mandate for $150,000,000 Senior Secured Revolving Credit Facility; Legal Analysis and Strategic Options
MATTER NO.: 1044-00002
This memorandum is privileged and confidential and is provided solely for the use of the Board of Directors of Thalassa Shipping & Logistics SA. It has been prepared by Calderwood & Harkness LLP in connection with our representation of Thalassa Shipping & Logistics SA and is protected by the attorney-client privilege. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
I. EXECUTIVE SUMMARY
On July 18, 2023, Meridian Atlantic Bank, National Association ("Meridian Atlantic," "MAB," or the "Bank") publicly announced its strategic decision to wind down its Shipping & Maritime Finance Division on a global basis, ceasing all new shipping commitments effective immediately and commencing an orderly run-off of its existing maritime lending portfolio. The announcement, communicated internally by Marcus Whitfield, Head of the Shipping Finance Division, and subsequently confirmed through a press release issued by MAB's corporate communications department, represents one of the most significant withdrawals from the shipping finance sector in recent years and has material implications for Thalassa Shipping & Logistics SA ("TSL," the "Company," or "Thalassa").
On July 19, 2023 — the day following the public announcement — Catherine Hsiang, MAB's Relationship Manager assigned to the TSL account, formally notified TSL of the Bank's withdrawal from the mandate to act as Sole Lead Arranger, Sole Bookrunner, and Administrative Agent for the proposed $150,000,000 senior secured revolving credit facility (the "Proposed Facility"). The notification was delivered via email to Elena Vassiliou (CEO) and Aris Komnenidis (General Counsel) at 9:14 a.m. Eastern Time, followed by a brief telephone call at approximately 10:30 a.m. Eastern Time in which Ms. Hsiang expressed regret but confirmed that the Bank's decision was final and applied to all pending shipping mandates globally.
This notification came after approximately five months of active negotiation and documentation efforts, during which the parties had reached agreement on substantially all material terms of the Proposed Facility. By the time of MAB's withdrawal, the credit agreement was in near-final form (a clean draft having been circulated by Whitmore, Jennings & Alcott LLP on July 3, 2023), vessel appraisals for all eighteen Mortgaged Vessels had been delivered by Seastone Maritime Advisors Ltd. on July 10, 2023, and syndicate commitments totaling $105,000,000 from Nordkapp Maritime Finance AG ($40,000,000), Clearwater Commercial Lending LLC ($35,000,000), and Eastbourne Capital Partners LLP ($30,000,000) had been confirmed on July 14, 2023 — just four days before MAB's announcement.
The Board has asked Calderwood & Harkness LLP ("C&H" or "Calderwood & Harkness") to analyze the legal implications of MAB's withdrawal and to advise on the Company's options going forward. This memorandum addresses the following questions:
(a) Whether MAB's withdrawal from the mandate was contractually permissible under the terms of the Mandate and Fee Letter dated February 14, 2023 (the "Mandate Letter");
(b) Whether TSL has any rights to a refund of fees paid or advanced to MAB under the Mandate Letter;
(c) What options are available to TSL to secure a replacement arranger for the Proposed Facility or a comparable refinancing;
(d) The implications of MAB's withdrawal for the maturity of the existing $125,000,000 revolving credit facility with Harborstone National Bank (the "Existing Facility"), which matures on November 15, 2023; and
(e) The feasibility of amending or extending the Existing Facility as an interim measure to bridge the gap while a permanent refinancing solution is pursued.
Summary of Conclusions. Based on our preliminary analysis, and subject to the caveats and qualifications set forth in this memorandum, we have reached the following conclusions:
MAB's withdrawal, while deeply disruptive to TSL's refinancing plans, appears to constitute a strategic business decision that is not clearly prohibited by the terms of the Mandate Letter. The Mandate Letter was structured on a customary "best efforts" basis rather than as a firm underwriting commitment, and it contains standard conditions to MAB's obligations — including the absence of a material adverse change and the satisfaction of due diligence — that provide MAB with significant latitude. While TSL may have arguments based on the implied covenant of good faith and fair dealing under New York law, the prospects of compelling MAB to proceed with the transaction or recovering significant damages through litigation are uncertain at best and would require protracted and costly proceedings. We recommend preserving TSL's rights through a formal reservation of rights letter while deferring a definitive litigation decision until the Company's more immediate refinancing needs are addressed.
The most pressing risk facing TSL is the approaching maturity of the Existing Facility on November 15, 2023 — now fewer than four months away. Failure to refinance or extend the Existing Facility by that date would result in all outstanding obligations (approximately $124,687,500) becoming immediately due and payable, which could trigger cross-default provisions in other TSL agreements and expose the Company's vessel collateral to enforcement proceedings. Addressing this maturity deadline must be TSL's highest priority.
We recommend a dual-track strategy: (i) immediately contacting existing syndicate members and other potential replacement arrangers to assess the feasibility of reconstituting the Proposed Facility or a comparable refinancing, and (ii) simultaneously engaging with Harborstone National Bank to negotiate a short-term maturity extension of the Existing Facility to provide the Company with adequate runway. Both workstreams should commence without delay.
II. BACKGROUND AND PROCEDURAL HISTORY
A. The Proposed Facility
TSL sought to refinance its Existing Facility — a $125,000,000 revolving credit facility provided by Harborstone National Bank — with a new, larger $150,000,000 senior secured revolving credit facility. The Existing Facility was entered into pursuant to a Credit Agreement dated November 15, 2018 (the "Harborstone Credit Agreement"), as amended by the First Amendment to Credit Agreement dated June 30, 2020 (the "First Amendment") and the Second Amendment to Credit Agreement dated March 1, 2022 (the "Second Amendment"). The Existing Facility was approaching the end of its five-year term, with a maturity date of November 15, 2023.
The Proposed Facility was intended not only to replace the Existing Facility but also to provide TSL with $25,000,000 of incremental liquidity beyond the existing commitment level. The additional capacity was earmarked for general corporate purposes and working capital, reflecting the Company's expanded fleet size and increased operating requirements since the Existing Facility was originally put in place in 2018.
The Proposed Facility was to be structured as follows:
Facility Type and Amount. The Proposed Facility was a senior secured revolving credit facility in an aggregate principal amount of $150,000,000. It included sublimits for standby and commercial letters of credit in an aggregate face amount of up to $20,000,000, and for swingline loans in an aggregate principal amount of up to $15,000,000. The letter of credit sublimit and swingline sublimit were to be part of, and not in addition to, the overall $150,000,000 commitment.
Governing Law and Jurisdiction. The Proposed Facility was to be governed by the laws of the State of New York, without regard to conflicts of law principles. The parties were to submit to the exclusive jurisdiction of the federal and state courts located in the Borough of Manhattan, City and State of New York.
Maturity. The maturity date was to be five years from the closing date. Based on the anticipated closing timeline, this would have resulted in a maturity in mid-2028, providing the Company with a significantly longer tenor than the remaining term of the Existing Facility.
Interest Rate. Borrowings under the Proposed Facility were to bear interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") — specifically, adjusted Term SOFR for interest periods of one, three, or six months, at the election of TSL — plus an applicable margin. The applicable margin was to be determined pursuant to a leverage ratio grid, ranging from 225 basis points at the lowest pricing tier (when the Company's consolidated net leverage ratio was at or below 2.50:1.00) to 325 basis points at the highest pricing tier (when the consolidated net leverage ratio exceeded 4.00:1.00). The transition from LIBOR to SOFR as the benchmark rate represented an update from the Existing Facility, which was originally structured on a LIBOR-based pricing framework.
Collateral Package. The Proposed Facility was to be secured by a comprehensive collateral package consisting of the following:
(i) First-priority ship mortgages on eighteen (18) designated vessels (the "Mortgaged Vessels"), with an aggregate appraised fair market value of approximately $780,000,000 as determined by Seastone Maritime Advisors Ltd. in appraisals delivered on July 10, 2023;
(ii) Assignment of earnings accounts maintained by the vessel-owning subsidiaries;
(iii) Assignment of hull & machinery insurance and protection & indemnity ("P&I") insurance for each Mortgaged Vessel;
(iv) Pledge of 100% of the equity interests in each vessel-owning subsidiary holding title to a Mortgaged Vessel; and
(v) Assignment of time charter contracts with remaining terms of twelve (12) months or more.
The credit agreement included a minimum collateral coverage ratio of 140% of outstanding facility obligations. At full draw ($150,000,000), this would require minimum collateral value of $210,000,000. Based on the Seastone appraisals, the collateral coverage ratio at full draw would have been approximately 520% ($780,000,000 / $150,000,000), providing significant headroom above the minimum threshold. Pinnacle Trust & Agency Services Inc. was proposed to act as Collateral Agent and Security Trustee, responsible for holding and administering the security interests on behalf of the lenders.
Financial Covenants. The Proposed Facility included the following financial covenants, tested quarterly:
(i) Maximum Consolidated Net Leverage Ratio: 4.50:1.00 during the first two years of the facility, stepping down to 4.00:1.00 commencing in Year 3 and continuing through maturity;
(ii) Minimum Consolidated Interest Coverage Ratio: 3.00:1.00 at all times;
(iii) Minimum Liquidity: $30,000,000 in unrestricted cash and cash equivalents and availability under revolving credit facilities at all times; and
(iv) Maximum Capital Expenditures: $80,000,000 per fiscal year, with a one-year carry-forward of unused amounts up to a maximum of $20,000,000.
Roles and Parties. Meridian Atlantic Bank N.A. was appointed as Sole Lead Arranger, Sole Bookrunner, and Administrative Agent. TSL was the borrower. The syndicate lenders, upon closing, would have consisted of MAB (retaining a $45,000,000 commitment), Nordkapp Maritime Finance AG ($40,000,000), Clearwater Commercial Lending LLC ($35,000,000), and Eastbourne Capital Partners LLP ($30,000,000).
B. Timeline of Key Events
The following chronology sets forth the key events in the negotiation and documentation of the Proposed Facility, from the initial request for proposals through MAB's withdrawal:
January 18, 2023: TSL, through its CFO Dimitrios Pantazis and General Counsel Aris Komnenidis, issued a request for proposals (the "RFP") to a shortlist of banks with active shipping finance practices, inviting them to submit proposals for the refinancing of the Existing Facility. The RFP was distributed to approximately six financial institutions, including Meridian Atlantic, Nordkapp Maritime Finance AG, and several other international banks with shipping lending capabilities.
February 14, 2023: Following evaluation of the proposals received in response to the RFP, TSL selected Meridian Atlantic Bank N.A. as the lead arranger for the Proposed Facility. The Mandate and Fee Letter was executed on this date by Elena Vassiliou on behalf of TSL and by Marcus Whitfield on behalf of MAB. The Mandate Letter set forth the principal terms of MAB's engagement, including the scope of its duties, the fee arrangements, and the conditions to its obligations.
March 10, 2023: Calderwood & Harkness LLP was formally engaged as legal counsel to TSL in connection with the Proposed Facility. An engagement letter was executed by Aris Komnenidis on behalf of TSL and by Ian Blackwood on behalf of C&H. The matter was formally opened on March 13, 2023 under Matter No. 1044-00002. The C&H deal team was led by Ian Blackwood (Partner, Banking & Finance), with Sophie Tremblay (Senior Associate, Banking & Finance) serving as the primary day-to-day contact.
March 20, 2023: MAB, through its lender's counsel Whitmore, Jennings & Alcott LLP ("WJA"), circulated an initial term sheet reflecting the proposed terms of the Proposed Facility. C&H delivered its markup of the term sheet on March 27, 2023, following internal review with TSL management. The markup addressed, among other things, the applicable margin pricing grid, the financial covenant levels, the scope of the negative covenants (particularly with respect to permitted indebtedness and permitted liens), and certain conditions precedent to closing.
April 5, 2023 through July 3, 2023: The parties engaged in an intensive documentation process spanning approximately three months. WJA circulated three successive drafts of the credit agreement: the initial draft on April 5, 2023, a revised draft reflecting C&H's initial comments on May 1, 2023, and a further revised draft on June 12, 2023. C&H delivered comprehensive markups in response to each draft. An issues list identifying twenty-eight (28) open points was circulated by C&H on May 15, 2023, and the parties held a negotiation call focused on financial covenant levels and definitions on May 22, 2023. Draft security documents — including the form of first preferred ship mortgage, the share pledge agreement, the assignment of earnings agreement, and the assignment of insurances agreement — were circulated by WJA on June 16, 2023, and marked up by C&H on June 23, 2023. The near-final credit agreement was circulated by WJA on July 3, 2023, accompanied by a comprehensive closing checklist identifying seventy-eight (78) items required for closing.
July 10, 2023: Seastone Maritime Advisors Ltd. delivered vessel appraisals for all eighteen Mortgaged Vessels. The appraisals were conducted under the direction of lead appraiser Duncan Fairweather and reflected an aggregate fair market value of approximately $780,000,000 as of the date of appraisal. The appraisals were a condition precedent to closing and a key element of the lenders' credit analysis.
July 14, 2023: All three syndicate lenders confirmed their respective commitments in writing:
• Nordkapp Maritime Finance AG: $40,000,000 commitment (contact: Anders Dalmqvist, Managing Director, Shipping Lending);
• Clearwater Commercial Lending LLC: $35,000,000 commitment (contact: Rosa Menendez, Senior Vice President); and
• Eastbourne Capital Partners LLP: $30,000,000 commitment (contact: Gavin Holt, Partner, Maritime Credit).
Together with MAB's retained commitment of $45,000,000, total commitments of $150,000,000 were confirmed, representing a fully subscribed syndication. The successful completion of syndication was itself a significant milestone, given the challenging market environment for shipping finance.
July 18, 2023: Meridian Atlantic Bank N.A. publicly announced its strategic decision to wind down its Shipping & Maritime Finance Division globally, effective immediately. The announcement indicated that the Bank would cease all new shipping commitments and commence an orderly wind-down of its existing maritime lending portfolio. The decision was communicated internally by Marcus Whitfield, Head of the Shipping Finance Division, who indicated that the decision had been taken by MAB's Executive Committee as part of a broader strategic review of the Bank's lending verticals.
July 19, 2023: Catherine Hsiang, MAB Relationship Manager, formally notified TSL of the Bank's withdrawal from the mandate for the Proposed Facility. The notification was delivered by email and confirmed by telephone. Ms. Hsiang indicated that the decision was final and applied to all pending shipping finance mandates globally, not specifically to TSL. She expressed regret over the disruption and offered to facilitate introductions to other financial institutions, though no specific replacement candidates were identified.
C. Status of Documentation at Withdrawal
At the time of MAB's withdrawal, the documentation for the Proposed Facility was at an advanced stage, but no documents had been executed and no conditions precedent to closing had been formally satisfied. The status of the principal workstreams was as follows:
Credit Agreement. The near-final clean draft of the credit agreement was circulated by WJA on July 3, 2023. All material terms had been agreed between the parties, including the financial covenants, the negative covenants, the representations and warranties, the conditions precedent, and the events of default. A limited number of conforming changes and cross-referencing corrections remained to be addressed in the execution version, but no substantive issues were outstanding. No execution version was signed.
Security Documents. The forms of security documents — including the first preferred ship mortgage, the share pledge agreement, the assignment of earnings agreement, and the assignment of insurances agreement — were in an advanced markup stage. C&H had delivered its markup of all forms on June 23, 2023. WJA had not yet circulated revised drafts reflecting C&H's comments, and accordingly the security documents were not in agreed form. The security documents would have required execution by the relevant vessel-owning subsidiaries of TSL, notarization (in the case of certain share pledges), and registration with the relevant ship registries and corporate registries.
Closing Conditions. A seventy-eight-item closing checklist had been prepared by WJA and circulated on July 3, 2023. All items on the checklist were marked as "pending" or "in progress." No conditions precedent to closing — including delivery of executed documents, officer's certificates, legal opinions, insurance certificates, corporate authorizations, or evidence of regulatory compliance — had been formally satisfied.
Legal Opinions. Draft outlines of the legal opinions had been prepared but neither opinion had been finalized or delivered. Calderwood & Harkness had prepared a draft outline of its New York law legal opinion (dated July 1, 2023), and Pavlopoulos & Drakos Law Firm, Greek counsel to TSL, had prepared a draft outline of its Greek law legal opinion (dated June 30, 2023) covering matters of Greek corporate law, the due authorization and execution of documents by Greek entities, and the enforceability of Greek-law security documents.
Corporate Authorizations. A draft secretary's certificate for TSL was prepared on June 28, 2023, but the board resolutions authorizing the entry into the Proposed Facility and the execution of the credit agreement and related documents had not yet been adopted. The expectation had been that the board would adopt the necessary resolutions in the period immediately preceding closing, once all documentation had been finalized.
Funds Flow. A draft closing funds flow memorandum was prepared on July 6, 2023, reflecting an initial borrowing of $125,000,000 under the Proposed Facility, a payoff of the Harborstone Existing Facility in the amount of $124,687,500, payment of fees in the amount of $825,000, and a net shortfall of $512,500 to be funded by TSL from available cash. The funds flow memorandum was never finalized or agreed by the parties.
In summary, while the transaction was at an advanced stage of preparation, the critical legal threshold of execution had not been crossed. No documents were signed. No borrowing occurred. No lender made any advance of funds. This status has significant implications for the analysis of TSL's legal options, as discussed in Section III below.
III. ANALYSIS OF MERIDIAN ATLANTIC'S RIGHTS TO WITHDRAW UNDER THE MANDATE LETTER
A. Terms of the Mandate and Fee Letter
The legal relationship between TSL and MAB with respect to the Proposed Facility is governed principally by the Mandate and Fee Letter dated February 14, 2023 (the "Mandate Letter"), executed between TSL and Meridian Atlantic Bank N.A. The Mandate Letter is a New York law-governed agreement setting forth the terms of MAB's appointment as Sole Lead Arranger, Sole Bookrunner, and Administrative Agent for the Proposed Facility.
Mandate letters in the leveraged and structured finance markets — and in the shipping finance market in particular — are highly standardized instruments that serve a specific function in the transaction lifecycle. They are executed at the outset of the engagement, typically before detailed documentation commences, and they define the scope of the arranger's duties, the fee arrangements, and the conditions under which the arranger is obligated (or not obligated) to perform. Critically, mandate letters in the shipping finance market are customarily structured on a "best efforts" basis rather than as firm underwriting commitments. This distinction is of central importance to the analysis of MAB's rights to withdraw.
Under a "best efforts" mandate, the arranger agrees to use its commercially reasonable efforts to arrange and syndicate the facility on the terms described in the mandate letter, but does not guarantee that the facility will close or that the syndication will be successful. The arranger does not assume the risk of funding in the event that syndication is not completed on satisfactory terms. This stands in contrast to a "firm commitment" or "underwritten" mandate, in which the arranger commits to fund the entire facility (or a specified portion thereof) regardless of the outcome of the syndication process, subject to limited conditions. Firm commitments are more commonly encountered in the leveraged acquisition finance market and carry significantly higher fees to compensate the arranger for the underwriting risk assumed.
The Mandate Letter for the Proposed Facility, consistent with market practice for shipping finance transactions, was structured as a "best efforts" arrangement. The following provisions of the Mandate Letter are relevant to the analysis of MAB's withdrawal:
(i) Syndication Obligation: MAB agreed to use "commercially reasonable efforts" to arrange and syndicate the Proposed Facility among a group of lenders acceptable to TSL and MAB on the terms set forth in the Mandate Letter and the attached term sheet. The Mandate Letter did not contain a firm commitment to fund.
(ii) Market Flex Provisions: The Mandate Letter contained standard market flex provisions permitting MAB to adjust the pricing, structure, and terms of the Proposed Facility as MAB reasonably determined to be necessary or advisable to ensure successful syndication. These provisions gave MAB significant discretion to alter the economics and terms of the transaction.
(iii) Conditions to MAB's Obligations: MAB's obligations under the Mandate Letter were expressly conditioned on, among other things: (a) satisfactory completion of due diligence (including review of TSL's financial condition, fleet composition, charter portfolio, and legal structure); (b) the absence of any "Material Adverse Change" (as defined in the Mandate Letter) in the business, condition, operations, or prospects of TSL; (c) the absence of any "Market Disruption" (as defined in the Mandate Letter) that, in MAB's reasonable judgment, would materially adversely affect the syndication of the Proposed Facility; and (d) the preparation of documentation in form and substance satisfactory to MAB and its counsel.
(iv) Termination/Withdrawal Provisions: The Mandate Letter contained provisions addressing the circumstances under which the mandate could be terminated. While we are continuing to review the specific language of the termination provisions, mandate letters of this type typically provide for termination by the arranger upon the occurrence of specified events (including a Material Adverse Change, a Market Disruption, or the failure to satisfy conditions within a specified timeframe) and may also include a general right of termination by either party upon written notice. The Mandate Letter did not, to our preliminary review, contain an express prohibition on withdrawal by the arranger based on internal strategic considerations.
In addition to the express provisions of the Mandate Letter, every contract governed by New York law carries an implied covenant of good faith and fair dealing, which imposes on each party a duty not to act in a manner that would deprive the other party of the benefit of the contract. The scope and application of the implied covenant in the context of the Mandate Letter is discussed in Section III.B below.
B. Legal Analysis: Was MAB's Withdrawal Permissible?
The central question is whether MAB's decision to withdraw from the mandate — motivated not by any credit deterioration of TSL or any market disruption specific to this transaction, but by an internal strategic decision to exit the shipping finance business entirely — was permissible under the Mandate Letter and applicable law.
Nature of MAB's Decision. MAB's July 18, 2023 announcement to exit shipping finance constitutes a strategic business decision made at the corporate level, reflecting a reallocation of capital and resources away from the maritime lending sector. The decision was not precipitated by any deterioration in TSL's creditworthiness, any adverse change in TSL's business or financial condition, any disruption in the syndicated lending market, or any specific difficulty in the syndication of the Proposed Facility. To the contrary, syndication had been completed successfully, with all three target syndicate banks having confirmed their commitments just four days before the announcement. TSL's financial profile remained strong throughout the mandate period, and no event of default or covenant breach had occurred or was anticipated under the Existing Facility or any other agreement.
The "Best Efforts" Standard. Under New York law, a "best efforts" obligation requires the promisor to act with diligence and in good faith, taking all reasonable steps to fulfill the obligation, but does not impose an absolute duty to achieve a particular result. Courts have generally interpreted "best efforts" and "commercially reasonable efforts" obligations as requiring the promisor to pursue the objective with the level of effort that a reasonable person in the same position would undertake, considering all relevant circumstances, but not to the point of self-destruction or financial ruin. See, e.g., Bloor v. Falstaff Brewing Corp., 601 F.2d 609 (2d Cir. 1979); Tibbetts Contracting Corp. v. O & E Contracting Co., 15 N.Y.3d 324 (2010).
In the context of a mandate letter structured on a "best efforts" basis, courts have generally interpreted the arranger's obligation as requiring the arranger to use commercially reasonable efforts to syndicate and arrange the facility on the agreed terms, but not as compelling the arranger to fund the facility out of its own resources or to close the transaction in the face of a genuine inability or unwillingness to proceed. The distinction between a "best efforts" mandate and a "firm commitment" exists precisely to allocate the risk of non-completion — under a "best efforts" structure, the borrower bears the risk that the arranger may be unable or unwilling to close, while under a firm commitment, the arranger bears that risk.
Application to MAB's Withdrawal. MAB's decision to wind down its entire Shipping & Maritime Finance Division globally is broader and more fundamental than a transaction-specific exercise of market flex or a Material Adverse Change-based termination. It reflects a wholesale strategic reorientation of the Bank's business, eliminating the division that would have originated, administered, and serviced the Proposed Facility. In this respect, it is arguably different from the types of events contemplated by the specific conditions and termination provisions of the Mandate Letter, which are generally designed to address transaction-specific risks rather than the arranger's own strategic choices.
However, several factors weigh against a finding that MAB's withdrawal constituted a breach of the Mandate Letter:
(i) The Mandate Letter was structured on a "best efforts" basis and did not contain a firm commitment to fund. MAB retained discretion — subject to the duty of good faith — in determining whether and how to proceed with the syndication and arrangement of the facility.
(ii) The Mandate Letter likely does not contain an affirmative obligation requiring MAB to maintain a shipping finance division, to retain any particular personnel, or to proceed to closing irrespective of internal strategic changes. Mandate letters are not perpetual commitments; they are limited-purpose engagement instruments.
(iii) No execution version of the credit agreement was signed. No conditions precedent were satisfied. No funds were advanced. The transaction had not yet ripened into a binding lending commitment on the part of MAB.
(iv) MAB's decision applied globally to all pending shipping mandates, not selectively to TSL. This undercuts any argument that the withdrawal was targeted at TSL or motivated by bad faith with respect to this particular transaction.
Implied Covenant of Good Faith and Fair Dealing. Notwithstanding the foregoing, TSL has a potentially meritorious argument — though its outcome is uncertain — based on the implied covenant of good faith and fair dealing. Under New York law, the implied covenant prohibits a party from acting in a manner that would destroy the right of the other party to receive the fruits of the contract. See Dalton v. Educational Testing Service, 87 N.Y.2d 384 (1995). TSL could argue that MAB's withdrawal, coming after months of active engagement and after syndication had been successfully completed, deprived TSL of the benefit of the Mandate Letter — namely, the expectation that MAB would use its best efforts to bring the Proposed Facility to closing.
However, New York courts have been reluctant to use the implied covenant to override or supplement express contractual provisions. The implied covenant is not an independent source of obligations; it serves only to ensure that the express terms of the contract are performed in good faith. Where the contract expressly permits termination or contemplates circumstances under which the arranger's obligations may cease, the implied covenant cannot be invoked to impose additional limitations not found in the contract's express language. See, e.g., Harris v. Provident Life & Accident Insurance Co., 310 F.3d 73 (2d Cir. 2002); Moran v. Erk, 11 N.Y.3d 452 (2008).
Preliminary Conclusion. While MAB's withdrawal is highly unusual and deeply disruptive — and while there are reasonable arguments that it was inconsistent with the spirit, if not the letter, of the Mandate Letter — the absence of a firm commitment, the "best efforts" nature of the engagement, the breadth of the conditions to MAB's obligations, and the fact that no documents were executed collectively make it difficult for TSL to compel MAB to proceed or to recover substantial damages for failure to close. The legal landscape in this area is not entirely settled, and a more detailed analysis of the specific language of the Mandate Letter's termination provisions and the implied covenant of good faith is warranted if the Board determines to pursue claims against MAB. However, as a practical matter, litigation against MAB would not resolve TSL's immediate refinancing needs and should be viewed as a secondary consideration to the critical priority of addressing the November 15, 2023 maturity of the Existing Facility.
C. Potential Claims Against MAB
If TSL elects to pursue legal claims against MAB, the following causes of action merit consideration:
1. Breach of Contract. TSL could assert that MAB breached its obligations under the Mandate Letter by failing to use commercially reasonable efforts to arrange and syndicate the Proposed Facility and by withdrawing from the mandate before the transaction was completed. However, as discussed above, the prospects for this claim are limited given the "best efforts" structure of the Mandate Letter. MAB can be expected to argue that its internal decision to exit shipping finance removed its ability to proceed with the mandate, and that the Mandate Letter did not obligate it to maintain its shipping finance operations or to close the transaction at all costs. MAB may further argue that the conditions to its obligations — including conditions relating to satisfactory documentation and the exercise of its market flex rights — were within its discretion and had not been fully satisfied at the time of withdrawal.
2. Breach of Implied Covenant of Good Faith and Fair Dealing. TSL has a stronger, though still uncertain, argument that MAB's withdrawal breached the implied covenant of good faith and fair dealing. The core of this argument would be that MAB's decision to exit shipping finance was arbitrary and unrelated to the creditworthiness of this transaction, and that by withdrawing after five months of active engagement — and just days after syndication had been successfully completed — MAB acted in bad faith by depriving TSL of the reasonable expectation that the Proposed Facility would be brought to closing. TSL could point to the substantial resources it invested in reliance on MAB's commitment, the timing of the withdrawal (immediately after the syndication milestone), and the absence of any transaction-specific justification for the withdrawal.
The countervailing arguments are those discussed in Section III.B above: New York courts have been reluctant to use the implied covenant to override express contractual provisions, and MAB would argue that the Mandate Letter's express terms — including the "best efforts" standard and the various conditions to its obligations — did not guarantee closing and preserved MAB's discretion to terminate the engagement.
3. Promissory Estoppel / Detrimental Reliance. TSL could assert a claim for promissory estoppel, arguing that MAB made a clear and unambiguous promise (through the Mandate Letter and its conduct throughout the engagement) to arrange the Proposed Facility, that TSL relied on this promise to its detriment by incurring substantial costs, and that injustice can be avoided only by enforcement of the promise. TSL's costs incurred in reliance on the mandate include:
• Calderwood & Harkness legal fees billed through the closure of the active documentation workstream: $412,850;
• Out-of-pocket disbursements (including filing fees, search fees, courier charges, and travel expenses): $18,340;
• Internal management time devoted to the transaction by TSL's executive team, in-house legal department, and finance team over the five-month period — a significant opportunity cost that is difficult to quantify precisely but is substantial;
• Vessel appraisal costs paid to Seastone Maritime Advisors Ltd.;
• Costs incurred by Pavlopoulos & Drakos Law Firm in connection with Greek law advice and opinion preparation; and
• Potential incremental costs associated with the need to pursue alternative refinancing on an expedited basis.
A promissory estoppel claim would require TSL to demonstrate that its reliance on MAB's promise was reasonable and foreseeable. While TSL has strong arguments on this point — the Mandate Letter was a formal written agreement, and TSL's reliance was both reasonable and foreseeable — the claim is subject to the counterargument that TSL, as a sophisticated commercial party with experienced legal counsel, was aware of the "best efforts" nature of the mandate and the risk that the facility might not close.
4. Practical Considerations. Litigation against MAB would be time-consuming, costly, and uncertain in outcome. The filing of a lawsuit could also complicate TSL's ongoing relationships with the financial community and potentially discourage replacement arranger candidates from stepping into the transaction. Moreover, litigation would not address TSL's immediate need to refinance or extend the Existing Facility before November 15, 2023.
We therefore recommend the following approach: (i) send a formal written reservation of rights letter to MAB immediately, preserving all claims under the Mandate Letter and applicable law; (ii) defer a definitive decision on whether to pursue litigation until the Company's refinancing situation is resolved and the Board can evaluate the matter with the benefit of additional time and information; and (iii) if the Board elects to pursue claims, retain a litigation partner at Calderwood & Harkness or outside litigation counsel with experience in bank mandate disputes to conduct a comprehensive evaluation and develop a litigation strategy.
IV. TSL'S RIGHTS TO REFUND OF FEES PAID UNDER THE MANDATE LETTER
A. Fees Paid to MAB
The Mandate Letter provided for the following fee arrangements:
Upfront/Arranging Fee. The Mandate Letter provided for an upfront arranging fee of $750,000, calculated as 0.50% of the $150,000,000 facility amount. The payment terms for this fee must be analyzed carefully to determine whether TSL has made any payment that is now subject to refund. In the shipping finance market, upfront arranging fees are typically structured as payable at or upon closing of the credit facility, with the amount being deducted from the initial advance under the facility. Under this structure, if closing does not occur, the fee does not become payable and no refund issue arises. However, some mandate letters provide for a portion of the arranging fee — sometimes characterized as a "work fee," "commitment deposit," or "initial fee" — to be payable upon execution of the mandate letter or at specified milestones during the documentation process. Whether any such advance payment was made by TSL requires verification against the specific terms of the Mandate Letter and TSL's payment records.
Administrative Agent Fee. The Mandate Letter provided for an annual administrative agent fee of $75,000, payable to MAB in its capacity as Administrative Agent under the Proposed Facility. This fee was to commence upon closing of the facility and was payable annually in advance. Since closing did not occur, no administrative agent fee became payable, and no refund issue arises with respect to this fee.
Expense Reimbursement. Mandate letters customarily provide for the borrower to reimburse the arranger's reasonable out-of-pocket expenses incurred in connection with the syndication and documentation of the facility, including the fees and expenses of the arranger's legal counsel (in this case, Whitmore, Jennings & Alcott LLP). TSL may have advanced expense reimbursement payments to MAB during the documentation process. The Mandate Letter should be reviewed to determine whether any expense reimbursement amounts are outstanding and whether TSL has the right to recover any portion of such amounts in light of MAB's withdrawal.
B. Refund Provisions
The availability of a refund depends on the specific language of the Mandate Letter's fee provisions. Several scenarios are possible:
Scenario 1: Fees Payable at Closing. If the arranging fee was structured as payable entirely at closing, and closing did not occur, then no fee payment obligation arose and no refund is needed. TSL would have no obligation to pay the $750,000 arranging fee, and MAB would have no right to demand payment.
Scenario 2: Advance Payment with Non-Refundable Clause. If any portion of the fee was advanced to MAB at the time of mandate execution or at an interim milestone, and the Mandate Letter provides that fees are non-refundable once paid, TSL's ability to reclaim the advance would be limited. Non-refundable fee provisions are common in mandate letters and are generally enforceable under New York law, as they compensate the arranger for its commitment of time and resources during the arrangement process. However, a non-refundable fee provision might be challenged if TSL can demonstrate that MAB's withdrawal was a breach of contract or was in bad faith, as enforcing the non-refundable provision in such circumstances could be viewed as unjust enrichment.
Scenario 3: Advance Payment with Refund Mechanism. If any portion of the fee was advanced and the Mandate Letter provides for a refund in whole or in part in the event of termination or non-closing, TSL would have a contractual right to demand the refund in accordance with the Mandate Letter's terms.
Expense Reimbursement. Any work fee or expense reimbursement advanced to MAB should be analyzed to determine whether a partial refund is available based on the work actually performed by MAB and its counsel through the date of withdrawal. If MAB has received expense reimbursement in excess of the actual costs incurred through July 19, 2023, TSL may be entitled to recover the excess. Conversely, MAB may assert a right to additional reimbursement for expenses incurred through the date of withdrawal.
Recommendation. Calderwood & Harkness will review the specific fee payment provisions of the Mandate Letter in detail and advise TSL on (i) whether any fee payments have been made to MAB, (ii) whether TSL has the right to a refund of any such payments, and (iii) the quantum of any refund claim. We will coordinate with Dimitrios Pantazis and TSL's finance team to verify the payment history. We recommend that, in the interim, TSL not make any additional payments to MAB under the Mandate Letter until this analysis is completed and that the reservation of rights letter to MAB expressly reserve TSL's right to seek a refund of any fees or expenses advanced.
V. OPTIONS FOR REPLACEMENT ARRANGER
A. Overview of the Challenge
Securing a replacement arranger for the Proposed Facility presents a significant practical challenge, compounded by adverse market dynamics and severe time pressure.
Market Context. The global shipping finance market has been undergoing a structural contraction over the past decade. Several major international banks have reduced or entirely exited their maritime lending operations, citing concerns about regulatory capital requirements, the cyclical volatility of the shipping sector, environmental and sustainability considerations, and strategic portfolio rebalancing. MAB's exit from shipping finance is emblematic of this broader trend. The number of financial institutions with the capacity, expertise, and willingness to act as lead arranger for a $150,000,000 shipping finance facility has diminished significantly. While certain specialist shipping banks, alternative lenders, and export credit agencies continue to be active in the sector, the pool of potential replacement arrangers is materially smaller than it would have been even five years ago.
Scale and Complexity. The Proposed Facility required a lead arranger capable of taking an initial hold of at least $45,000,000 and managing the syndication process to distribute the remaining commitment to a group of institutional lenders. Not every bank with a shipping lending capability has the balance sheet capacity, the credit appetite, or the syndication infrastructure to serve in this role. The replacement arranger would also need to assume the administrative agent function, which requires operational capacity to manage the day-to-day administration of the facility, including drawdown mechanics, interest rate calculations, compliance monitoring, and collateral management.
Timeline Pressure. The most critical constraint is time. The Existing Facility with Harborstone National Bank matures on November 15, 2023 — less than four months from the date of this memorandum. Securing a new arranger, negotiating a mandate letter, re-papering the transaction (or adapting the existing documentation), conducting the replacement arranger's credit review and approval process, completing syndication, and closing would realistically take three to six months, and possibly longer. This timeline extends well past the November 15, 2023 maturity of the Existing Facility, meaning that a replacement arranger strategy alone is insufficient to address the immediate maturity risk. A replacement arranger must be pursued in parallel with a Harborstone extension, as discussed in Section VII below.
B. Potential Replacement Arrangers
Calderwood & Harkness has identified the following institutions as potential candidates for the replacement arranger role. We recommend that TSL initiate outreach to each of these institutions immediately.
1. Nordkapp Maritime Finance AG. Nordkapp was the largest syndicate lender in the Proposed Facility, with a confirmed commitment of $40,000,000. The primary contact is Anders Dalmqvist, Managing Director, Shipping Lending, based in Oslo. Nordkapp is a well-established European maritime finance institution with deep expertise in the shipping sector and an existing relationship with the Proposed Facility. Having completed its credit analysis and committed to a $40,000,000 participation, Nordkapp is already familiar with TSL's credit profile, fleet, and the structure of the transaction. In principle, Nordkapp may be the most logical candidate to step up to the lead arranger role. However, stepping up from a $40,000,000 syndicate commitment to a lead arranger role with a $45,000,000 or greater hold position and responsibility for syndication management and administrative agent functions is a materially different undertaking. Nordkapp would need to secure internal credit approval for the enhanced role and increased exposure, and would expect to receive the arranging fee and administrative agent fee previously allocated to MAB. Calderwood & Harkness recommends that TSL initiate contact with Anders Dalmqvist immediately to gauge Nordkapp's willingness and capacity to assume this role.
2. Clearwater Commercial Lending LLC. Clearwater was committed to a $35,000,000 participation in the syndicate. The primary contact is Rosa Menendez, Senior Vice President, based in Miami. Clearwater is principally a commercial lending platform with a diversified portfolio; while it has been active in certain shipping-adjacent lending, it may lack the specialized infrastructure for lead arranger syndication in the shipping finance sector, including the operational capacity to serve as administrative agent for a multi-lender shipping facility. We recommend that TSL explore this option, but we view the prospects as uncertain given the specialized nature of the lead arranger role.
3. Eastbourne Capital Partners LLP. Eastbourne was committed to the smallest participation in the syndicate at $30,000,000. The primary contact is Gavin Holt, Partner, Maritime Credit, based in London. As a UK-based LLP, Eastbourne has been an active participant in the European shipping finance market, but its relatively modest commitment size and firm structure suggest that it may not have the capacity to take on a lead arranger role for a $150,000,000 facility. Nonetheless, TSL should contact Eastbourne to discuss the situation and assess any flexibility in its position.
4. Iniaia Merchant Bank SA. iniaia is a shipping-focused merchant bank that TSL did not approach during the original RFP process in January 2023. Based in Athens and Geneva, iniaia has been active in the Greek shipping market and has a reputation for providing tailored financing solutions to mid-size and large shipping companies. Iniaia could be approached as a potential replacement arranger, though it may offer less favorable pricing terms and may prefer a smaller facility size than the $150,000,000 originally contemplated. TSL should be prepared for the possibility that iniaia would seek to restructure the transaction to reflect its own credit parameters and market positioning.
5. Baltic Strait Capital GmbH. Baltic Strait Capital is a German-based maritime finance institution headquartered in Hamburg, with a well-established presence in European shipping lending. Baltic Strait has historically maintained an appetite for Greek shipping credits and may be a viable candidate for the lead arranger role. TSL has not previously had a lending relationship with Baltic Strait, and accordingly there would be a more extensive familiarization and credit evaluation process required. However, given the limited pool of qualified candidates, outreach to Baltic Strait is warranted.
Note on Syndicate Commitments. An important caveat relates to the status of the existing syndicate commitments from Nordkapp, Clearwater, and Eastbourne. These commitments were made in the context of a specific transaction structure in which MAB served as lead arranger and administrative agent. It is highly likely that the commitment letters from each syndicate lender were conditioned on MAB's participation in those roles. In the absence of MAB, the syndicate commitments may lapse automatically, or the syndicate lenders may elect to withdraw or renegotiate their commitments. TSL should seek to confirm the continued interest of each syndicate lender as quickly as possible, while acknowledging that formal re-commitment may require the identification and appointment of a replacement arranger.
C. Practical Considerations
Even if a replacement arranger is identified and willing to proceed, several practical challenges must be addressed:
Re-Documentation. The replacement arranger would require a new mandate letter to be negotiated and executed, reflecting the terms of its engagement (including fees, syndication strategy, conditions, and market flex provisions). The credit agreement, while in near-final form, was drafted by WJA as counsel to MAB and the lenders. The replacement arranger and its counsel — which may be WJA (if WJA is willing to continue) or a different law firm — will likely require revisions to the credit agreement and security documents to reflect the replacement arranger's credit policies, documentation standards, and institutional requirements. This re-documentation process would not start from scratch, as the existing documentation can serve as a strong starting point, but it would add time and cost to the transaction.
Credit Approval. The replacement arranger would need to conduct its own internal credit analysis and obtain approval from its credit committee before taking on the lead arranger role. Depending on the institution, this process could take several weeks to several months.
Syndication. If the existing syndicate commitments lapse or are renegotiated, the replacement arranger may need to reconstitute the syndicate, which would add further time to the process.
Timing. Based on our experience with comparable transactions, the realistic timeline for a replacement arrangement — encompassing mandate negotiation, credit approval, documentation, syndication, and closing — would be three to six months from the appointment of a replacement arranger. This means that even under the most optimistic scenario, closing of the replacement facility would not occur until the fourth quarter of 2023 at the earliest, and more likely in the first quarter of 2024. This timeline extends well past the November 15, 2023 maturity of the Existing Facility.
Recommendation. Calderwood & Harkness strongly recommends that TSL pursue replacement arranger outreach as an important medium-term workstream, but that this effort be conducted in parallel with — and not as a substitute for — the negotiation of a Harborstone extension, as discussed in Section VII below. The Harborstone extension is the most efficient and time-effective means of addressing the immediate maturity risk.
VI. IMPLICATIONS FOR HARBORSTONE RCF MATURITY
A. The Existing Facility
The Existing Facility is a $125,000,000 revolving credit facility provided by Harborstone National Bank, pursuant to the Credit Agreement dated November 15, 2018, as amended by the First Amendment dated June 30, 2020 and the Second Amendment dated March 1, 2022 (collectively, the "Harborstone Credit Agreement"). Harborstone National Bank serves as both the administrative agent and the sole lender under the Existing Facility. The primary relationship contact at Harborstone is Philip Rennert, Director, Structured Shipping Finance, located at 350 Park Avenue, 20th Floor, New York, NY 10022.
The Existing Facility has a stated maturity date of November 15, 2023. As of the date of this memorandum, that maturity date is approximately 114 days away. The Proposed Facility was designed to refinance the Existing Facility in full before this maturity date. With MAB's withdrawal, the path to a timely refinancing has been severely disrupted, and the November 15, 2023 maturity has become the most critical issue facing TSL.
B. Consequences of Non-Refinancing
If TSL is unable to refinance or extend the Existing Facility on or before November 15, 2023, the consequences would be severe and far-reaching:
Maturity Default. All outstanding obligations under the Harborstone Credit Agreement — including principal, accrued and unpaid interest, and any other amounts due — would become due and payable on November 15, 2023. Based on the draft closing funds flow memorandum prepared on July 6, 2023 in connection with the Proposed Facility, the outstanding principal under the Existing Facility was approximately $124,375,000. Accrued interest was approximately $312,500, bringing the total estimated payoff amount to approximately $124,687,500. Failure to repay this amount in full at maturity would constitute an event of default under the Harborstone Credit Agreement.
Cross-Default Provisions. An event of default under the Harborstone Credit Agreement could trigger cross-default provisions in other agreements to which TSL or its subsidiaries are parties, including any hedging agreements, vessel charter party agreements with default termination provisions, or other financial obligations. A cascading series of defaults could have a destabilizing effect on TSL's operations and financial position.
Enforcement Against Collateral. Following an event of default, Harborstone would be entitled to exercise its remedies under the Harborstone Credit Agreement and the associated security documents, including foreclosure on vessel mortgages, enforcement of share pledges over vessel-owning subsidiaries, and seizure of earnings accounts. While Harborstone may choose not to immediately pursue enforcement remedies — particularly given TSL's strong financial profile and the value of the collateral — the legal right to do so would exist, and the mere possibility of enforcement action could disrupt TSL's commercial operations, insurance arrangements, and relationships with charterers and counterparties.
Reputational Impact. A maturity default, even if ultimately resolved without enforcement, could damage TSL's reputation in the financial community and complicate future financing efforts. Counterparties, insurance providers, and charterers may view a default as a signal of financial distress, even if the underlying cause is a procedural gap resulting from MAB's withdrawal rather than any deterioration in TSL's creditworthiness.
This is, without question, the most critical and time-sensitive issue facing TSL. All other considerations — including the potential claims against MAB, the search for a replacement arranger, and the recovery of fees — are secondary to the imperative of ensuring that the Existing Facility is either refinanced or extended before November 15, 2023.
C. TSL's Financial Capacity
It is important to emphasize that the challenge facing TSL is one of market access and timing, not of creditworthiness. TSL's financial profile remains robust:
• Revenue: TSL's consolidated revenue for fiscal year 2022 was approximately $620,000,000, reflecting the strong charter rate environment in both the dry bulk and tanker sectors.
• EBITDA: Consolidated EBITDA for fiscal year 2022 was approximately $145,000,000, providing substantial cash flow to service debt obligations. At the existing debt level of approximately $124,375,000, the Company's net leverage ratio is well within the proposed financial covenants.
• Fleet Value: TSL operates a fleet of forty (40) vessels, comprising twenty-eight (28) dry bulk carriers and twelve (12) tankers, with an estimated total fleet value of approximately $1.2 billion. Of these, eighteen vessels were designated as Mortgaged Vessels under the Proposed Facility, with an appraised value of approximately $780,000,000. The remaining twenty-two vessels, with an estimated value of approximately $420,000,000, are unencumbered and represent additional potential collateral capacity.
• Debt Capacity: Based on the Company's EBITDA, fleet value, and debt levels, TSL's credit profile should comfortably support either a replacement refinancing at the $150,000,000 level or an extension of the Existing Facility. The Company is well within the financial covenant levels proposed for the Proposed Facility.
In short, TSL's fundamental creditworthiness is not in question. The Company's challenge is a procedural one — finding a replacement lender or securing an extension within a compressed timeframe — rather than a substantive credit issue. This distinction should be communicated clearly to Harborstone and to any potential replacement arranger, supported by updated financial information as appropriate.
VII. AMENDMENT/EXTENSION OF EXISTING HARBORSTONE FACILITY AS INTERIM MEASURE
A. Proposed Approach
Given the severe timeline pressure created by MAB's withdrawal and the realistic three-to-six-month timeline for securing and closing a replacement financing, Calderwood & Harkness recommends that TSL immediately approach Harborstone National Bank to negotiate a short-term maturity extension of the Existing Facility.
The objective of the extension would be to push the maturity date of the Existing Facility from November 15, 2023 to a date that provides TSL with adequate time to complete a permanent refinancing — ideally six to twelve months beyond the current maturity, i.e., a new maturity date of May 15, 2024 or November 15, 2024. This would transform the November 15, 2023 deadline from an imminent crisis into a manageable transition, allowing TSL to pursue replacement arranger outreach and refinancing on a realistic timeline.
Initial contact with Philip Rennert, Direc