THIRD MARKUP — BORROWER'S COMMENTS ON THIRD DRAFT CREDIT AGREEMENT
$150,000,000 SENIOR SECURED REVOLVING CREDIT FACILITY
DRAFT — SUBJECT TO FURTHER REVIEW AND NEGOTIATION — PRIVILEGED AND CONFIDENTIAL
Prepared by: Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022
On behalf of: Thalassa Shipping & Logistics SA (the "Borrower")
In response to the Third Draft Credit Agreement circulated by Whitmore, Jennings & Alcott LLP on June 2, 2023
Date of Markup: June 9, 2023
C&H Matter Number: 1044-00002
This redline reflects Calderwood & Harkness LLP's comments on the third draft credit agreement prepared by Whitmore, Jennings & Alcott LLP ("WJA"), counsel to Meridian Atlantic Bank, National Association, as Administrative Agent, and the Lenders. Ninety-four (94) comments remain open. Borrower's insertions appear in blue underline; deletions in red strikethrough. Marginal comments are numbered sequentially (Comments 1–94). This markup should be read in conjunction with the Issues List & Negotiation Matrix dated May 15, 2023, previously circulated among the parties.
TRANSMITTAL MEMORANDUM
CALDERWOOD & HARKNESS LLP 425 Park Avenue New York, NY 10022
MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
From: Sophie Tremblay, Senior Associate, Banking & Finance, Calderwood & Harkness LLP
To: Aris Komnenidis, General Counsel, Thalassa Shipping & Logistics SA Dimitrios Pantazis, Chief Financial Officer, Thalassa Shipping & Logistics SA
CC: Ian Blackwood, Partner, Banking & Finance, Calderwood & Harkness LLP Daniel Obi, Associate, Banking & Finance, Calderwood & Harkness LLP
Date: June 9, 2023
Re: Third Markup of Draft Credit Agreement — $150,000,000 Senior Secured Revolving Credit Facility
I. Summary. Enclosed please find our third markup of the draft credit agreement for the captioned facility. We are pleased to report that significant progress has been made since the commencement of documentation negotiations. For context, the trajectory of open comments across the three rounds of markup has been as follows:
• First Markup (delivered April 14, 2023): 847 open comments
• Second Markup (delivered May 8, 2023): 312 open comments
• Third Markup (this markup, June 9, 2023): 94 open comments
This represents a reduction of approximately 89% from the initial markup and 70% from the second markup. Substantial convergence has been achieved on the financial covenant levels, collateral terms, SOFR benchmark and fallback provisions, the commitment fee structure, and the overall economic terms of the facility. We believe the remaining 94 open points, while including several items of significance, are within the range of resolution through one or two additional negotiation sessions with WJA and the Administrative Agent.
II. Key Items Resolved Since Second Markup
We note that WJA (Harrison Caldwell, Partner, and Priya Subramanian, Senior Associate) has accepted the Borrower's positions on the following key items since our second markup:
1. SOFR Fallback Mechanics. The benchmark replacement provisions, including the term SOFR conventions, benchmark replacement waterfall, and conforming changes language, have been fully resolved. These provisions follow the ARRC-recommended hardwired approach and are now in agreed form.
2. Commitment Fee Step-Down Structure. The commitment fee has been agreed at 0.375% per annum on unused commitments, stepping down to 0.25% per annum at such times as utilization of the facility exceeds 50% of total commitments (i.e., the $75,000,000 utilization threshold). This reflects the Borrower's original proposal and was accepted by WJA in the third draft without further modification.
3. Financial Covenant Package (Article VII). The financial covenants are now fully agreed, reflecting the terms discussed and resolved on the negotiation call held on May 22, 2023, attended by all parties. The agreed financial covenant package is as follows:
(a) Maximum Consolidated Net Leverage Ratio: 4.50:1.00 for the first two fiscal years following closing, stepping down to 4.00:1.00 beginning in Year 3, tested quarterly on a trailing four-quarter basis;
(b) Minimum Consolidated Interest Coverage Ratio: 3.00:1.00, tested quarterly;
(c) Minimum Liquidity: $30,000,000 (comprising unrestricted cash and cash equivalents plus available unused revolving commitments), tested at all times; and
(d) Maximum Capital Expenditures: $80,000,000 per fiscal year, with a carry-forward of up to 50% of any unused amount to the immediately succeeding fiscal year.
III. Remaining Open Points — Distribution by Category
The 94 remaining open comments are concentrated in the following areas:
IV. Critical Open Points Requiring Client Input
We wish to draw your particular attention to the following items, which represent the highest-priority open points and will likely be the focus of the next negotiation session with WJA:
1. Material Adverse Change Definition and Its Role (Comments 2, 16, and 78). This remains the single most contentious issue in the documentation. WJA has narrowed the MAC definition to exclude general market conditions and industry-wide conditions (a positive development), but the Borrower requires additional carve-outs for changes in applicable law or GAAP, seasonal freight rate fluctuations, transaction announcement effects, and non-disproportionate geopolitical events. More critically, WJA continues to insist that (a) the MAC representation be a condition to each subsequent borrowing (Comment 16) and (b) a MAC constitute a standalone Event of Default (Comment 78). The Borrower's position — that the MAC representation should speak only as of the closing date and that MAC should not be an independent Event of Default — is a market-standard position for borrowers of TSL's credit profile. We recommend holding firm on this point.
2. Required Lender Voting Threshold (Comment 84). WJA's third draft defines "Required Lenders" as Lenders holding more than 66⅔% of total commitments. The Borrower proposes a 50% threshold, which is the prevailing market standard for revolving credit facilities of this nature. This point has significant implications for the Borrower's ability to obtain amendments, waivers, and consents going forward.
3. Change of Control Threshold (Comments 1 and 70). WJA has moved from 35% to 40% in the third draft; the Borrower requests 50%. Given Chairman Karadimitriou's current controlling interest and the family's long-term ownership structure, a 40% threshold creates an unnecessarily restrictive trigger. We recommend proposing a compromise at 50% with an exclusion for transfers among existing shareholders and family members.
4. Restricted Payments Basket (Comment 53). The Borrower proposes a dividend capacity of 50% of Consolidated Net Income of the prior fiscal year, subject to appropriate conditions (no Event of Default, pro forma covenant compliance, pro forma collateral coverage ratio of at least 160%). WJA's third draft limits this to 25%. This is a significant commercial point for the Borrower's dividend policy.
5. Cross-Default Threshold (Comment 63). The Borrower proposes $10,000,000 versus WJA's $5,000,000 and further proposes that the trigger be limited to actual acceleration (not mere default) of other indebtedness.
V. Recommendation. We recommend that the Borrower schedule an all-hands negotiation call with WJA (Harrison Caldwell, Partner, and Priya Subramanian, Senior Associate) and the Administrative Agent (Catherine Hsiang, Meridian Atlantic Bank) at the earliest available date to discuss and attempt to resolve the remaining 94 open points, with particular focus on the five critical items identified above. We suggest allocating a full day for this session.
Additionally, we note that several ancillary documents — including the ship mortgage markup, share pledge agreement, assignment of earnings, and assignment of insurances — are being negotiated on a parallel track and are the subject of separate correspondence. The Schedules to the credit agreement (Disclosed Litigation, Existing Indebtedness, Existing Liens, Existing Investments, and the Insurance Schedule) are under preparation by TSL's in-house team and should be circulated to WJA promptly to avoid delays.
Please do not hesitate to contact Ian Blackwood or me with any questions or comments on this markup. We are available to discuss at your convenience.
Sophie Tremblay Senior Associate, Banking & Finance Calderwood & Harkness LLP Tel: +1 (212) 555-7340 stremblay@calderwoodharkness.com
CREDIT AGREEMENT
dated as of [●], 2023
among
THALASSA SHIPPING & LOGISTICS SA, a société anonyme organized under the laws of the Hellenic Republic, as Borrower,
THE GUARANTORS PARTY HERETO,
MERIDIAN ATLANTIC BANK, NATIONAL ASSOCIATION, as Administrative Agent,
and
THE LENDERS PARTY HERETO
$150,000,000 SENIOR SECURED REVOLVING CREDIT FACILITY
Governing Law: State of New York
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RECITALS
WHEREAS, Thalassa Shipping & Logistics SA, a société anonyme organized and existing under the laws of the Hellenic Republic (the "Borrower"), has requested that the Lenders provide a senior secured revolving credit facility in an aggregate principal amount of One Hundred Fifty Million Dollars ($150,000,000) (the "Revolving Credit Facility");
WHEREAS, the proceeds of the Revolving Credit Facility will be used (a) to refinance in full the Borrower's existing revolving credit facility in an aggregate principal amount of One Hundred Twenty-Five Million Dollars ($125,000,000) provided under that certain Credit Agreement, dated as of November 15, 2018 (as amended by the First Amendment dated as of June 30, 2020 and the Second Amendment dated as of March 1, 2022, the "Existing Credit Agreement"), among the Borrower, Harborstone National Bank, as administrative agent, and the lenders party thereto, and (b) to provide Twenty-Five Million Dollars ($25,000,000) of incremental borrowing capacity for general corporate purposes, including working capital needs, of the Borrower and its Subsidiaries;
WHEREAS, the Guarantors have agreed to guaranty the obligations of the Borrower under this Agreement and the other Loan Documents; and
WHEREAS, the Lenders are willing to make available the Revolving Credit Facility upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Status Note: Mostly resolved. Six (6) remaining open comments in this Article (Comments 1–6).
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings specified below:
"Administrative Agent" means Meridian Atlantic Bank, National Association, in its capacity as administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any successor Administrative Agent appointed pursuant to Section 9.03.
"Applicable Margin" means, with respect to any Loan bearing interest at a rate based on Term SOFR, a rate per annum determined by reference to the Consolidated Net Leverage Ratio in effect from time to time, as set forth in the pricing grid below:
The Applicable Margin shall be determined based on the Compliance Certificate delivered pursuant to Section 5.02 and shall be adjusted on the date of delivery of each such Compliance Certificate. This definition has been agreed by the parties as of the negotiation call held on May 22, 2023.
"Borrower" means Thalassa Shipping & Logistics SA, a société anonyme organized under the laws of the Hellenic Republic.
"Change of Control" means .
Comment 1. Borrower continues to propose that the Change of Control definition require an actual change in more than 50% of the voting equity interests of TSL, rather than WJA's formulation which triggers on any "person or group" acquiring a specified threshold percentage. In the first draft, WJA's threshold was 35%; the second draft maintained 35%; the third draft moved the threshold to 40%. The Borrower requests 50% and proposes exclusions for transfers among existing shareholders and family members. Mr. Nikolaos Karadimitriou, as Founder and Chairman of TSL, currently holds a controlling interest in the Borrower, and the existing ownership structure should be preserved without risk of inadvertent triggering. This is a significant open point linked to Comment 70 (Change of Control as Event of Default) and Comment 11 (mandatory prepayment upon Change of Control). Priority: HIGH.
"Collateral Agent" means Pinnacle Trust & Agency Services Inc., in its capacity as collateral agent for the Secured Parties under the Security Documents, together with any successor Collateral Agent appointed in accordance with the terms of this Agreement.
"Commitment Fee Rate" means (a) 0.375% per annum at such times as the aggregate outstanding principal amount of all Revolving Loans, Swingline Loans, and LC Exposure is less than or equal to 50% of the Total Commitments (i.e., less than or equal to $75,000,000), and (b) 0.25% per annum at such times as such aggregate outstanding amount exceeds 50% of the Total Commitments (i.e., exceeds $75,000,000). This definition has been agreed.
"Consolidated EBITDA" has the meaning set forth in the definition agreed by the parties and attached hereto as part of Annex B (Financial Covenant Definitions). This definition has been agreed.
"Consolidated Net Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Total Indebtedness as of such date minus unrestricted cash and cash equivalents of the Borrower and its Subsidiaries as of such date, to (b) Consolidated EBITDA for the most recently completed four fiscal quarter period for which financial statements have been delivered (or are required to have been delivered) pursuant to Section 5.01. This definition has been agreed.
"Existing Credit Agreement" means that certain Credit Agreement, dated as of November 15, 2018, among the Borrower, Harborstone National Bank, as administrative agent, and the lenders party thereto, as amended by the First Amendment dated as of June 30, 2020 and the Second Amendment dated as of March 1, 2022, and as further amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof.
"Guarantors" means, collectively, (a) Thalassa Dry Bulk Holdings Ltd., a company organized under the laws of the Republic of Cyprus, (b) Thalassa Tanker Operations Ltd., a corporation organized under the laws of the Republic of the marshall Islands, and (c) Thalassa Logistics International Ltd., a company organized under the laws of the Republic of Cyprus, and, in each case, their respective successors and assigns.
"LC Sublimit" means $20,000,000. The LC Sublimit is a sublimit of, and not in addition to, the Total Commitments.
"Material Adverse Change" or "Material Adverse Effect" means any event, circumstance, development, condition, change, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the business, assets, liabilities, financial condition, or results of operations of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower or any Guarantor to perform its obligations under any Loan Document to which it is a party, or (c) the rights and remedies of the Administrative Agent, the Collateral Agent, or any Lender under any Loan Document; provided, however, that none of the following, either alone or in combination, shall be deemed to constitute, or be taken into account in determining whether there has occurred, a Material Adverse Change or Material Adverse Effect: (i) changes in general economic, business, financial, or market conditions (ii) changes or conditions generally affecting the international shipping industry (including changes in charter rates, vessel values, freight rates, fuel prices, or port costs).
Comment 2. The MAC/MAE definition remains a significant open point. WJA's third draft narrowed the exclusions to cover general market conditions and industry-wide conditions (clauses (i) and (ii) above), which represented positive movement from the second draft. However, the Borrower requests six additional carve-outs (marked in blue above): changes in applicable law or GAAP (clause (iii)), seasonal fluctuations in freight rates (clause (iv)), changes resulting from the announcement of the transactions contemplated by this Agreement (clause (v)), and geopolitical events not disproportionately affecting the Borrower (clause (vi)). These carve-outs are customary in credit agreements for international shipping companies and reflect the inherent volatility of the shipping industry, which should not give rise to a MAC finding absent a disproportionate impact on TSL specifically. This comment is linked to Comment 16 (MAC as a condition to subsequent borrowings), Comment 36 (MAC as a condition to closing), and Comment 78 (MAC as a standalone Event of Default). Priority: HIGH — this is the single most significant open point in the documentation.
"Maturity Date" means the date that is five (5) years after the Closing Date. This definition has been agreed.
"Mortgaged Vessels" means the eighteen (18) vessels designated on Annex A hereto, together with any additional vessels added to the collateral package pursuant to Section 5.07 (Collateral Maintenance) and any replacement vessels substituted in accordance with the terms of this Agreement. This definition has been agreed.
"Permitted Acquisition" means any acquisition by the Borrower or any Subsidiary of all or substantially all of the assets of, or all of the equity interests in, any Person (or any division or business unit thereof) engaged in the shipping, maritime logistics, or related industries, provided that (a) such acquisition is a consensual acquisition, (b) both immediately before and immediately after giving effect to such acquisition (on a pro forma basis), no Default or Event of Default shall have occurred and be continuing, (c) the Borrower shall be in pro forma compliance with all financial covenants set forth in Article VII, (d) the aggregate consideration paid by the Borrower and its Subsidiaries for such acquisition (including assumed indebtedness, earnout obligations, and deferred purchase price) shall not exceed in any individual transaction, and the aggregate consideration paid for all Permitted Acquisitions during any fiscal year shall not exceed , (e) the Borrower shall have delivered to the Administrative Agent a compliance certificate demonstrating pro forma compliance with the financial covenants, and (f) such acquisition shall have been approved by the board of directors (or equivalent governing body) of the target.
Comment 3. Borrower proposes increasing the individual Permitted Acquisition threshold from $15,000,000 to $25,000,000 and the aggregate annual basket from $40,000,000 to $60,000,000. WJA's third draft retained the $15,000,000/$40,000,000 thresholds from the second draft. Given the size of the Borrower's fleet (40 vessels, with an aggregate appraised value of approximately $780,000,000) and the Borrower's demonstrated track record of accretive acquisitions, the proposed thresholds are well within the Borrower's operational capacity. The proposed thresholds are consistent with the incurrence-based protections already built into the definition (pro forma covenant compliance, no default condition, board approval). This comment is linked to Comment 55 (Investments) and to the overall negative covenants framework in Article VI. Priority: MEDIUM.
"Permitted Indebtedness" means, without duplication, each of the following:
(a) Indebtedness under this Agreement and the other Loan Documents;
(b) Indebtedness outstanding on the Closing Date and set forth on Schedule 6.01 (Existing Indebtedness);
(c) Indebtedness in respect of capital leases and purchase money obligations in an aggregate principal amount not to exceed $10,000,000 at any time outstanding;
(d) Indebtedness consisting of guarantees of Indebtedness otherwise permitted under this definition;
(e) Indebtedness in respect of letters of credit, bank guarantees, and similar instruments issued in the ordinary course of business;
(f) Intercompany Indebtedness among the Borrower and its wholly owned Subsidiaries, provided that such Indebtedness is subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent;
(g) ; and
(h) other Indebtedness in an aggregate principal amount not to exceed $5,000,000 at any time outstanding.
Comment 4. Borrower seeks an increase in the general basket for unsecured Indebtedness of Subsidiaries not otherwise permitted from $10,000,000 (as set forth in WJA's third draft) to $20,000,000. The Borrower's Subsidiaries include numerous vessel-owning special purpose vehicles that may, from time to time, require working capital financing or other short-term unsecured credit accommodations in the ordinary course of their operations. A $10,000,000 basket is unduly restrictive given the scale of the Borrower's operations (40 vessels, approximately $620,000,000 in annual revenue). Priority: MEDIUM.
"Permitted Liens" means each of the following:
(a) Liens securing the Obligations under this Agreement and the other Loan Documents;
(b) Liens for taxes, assessments, or governmental charges not yet delinquent or being contested in good faith by appropriate proceedings with adequate reserves;
(c) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen, and other similar Liens arising in the ordinary course of business;
(d) Liens arising by operation of law, including ;
(e) ;
(f) ;
(g) Liens existing on the Closing Date and set forth on Schedule 6.02 (Existing Liens); and
(h) other Liens securing Indebtedness in an aggregate principal amount not to exceed $2,500,000 at any time outstanding.
Comment 5. Borrower proposes expanding the definition of Permitted Liens to include three additional categories: (i) Liens securing purchase money Indebtedness up to $10,000,000 (new clause (e)), (ii) Liens arising under charterparties in the ordinary course of business (new clause (f)), and (iii) maritime Liens arising by operation of law, including Liens for crew wages, necessaries, salvage, and general average contributions (expanded clause (d)). WJA's third draft accepted the inclusion of maritime Liens arising by operation of law but did not accept the purchase money Lien amount or the charterparty Lien carve-out. Maritime Liens arising by operation of law are an inherent feature of vessel ownership and cannot practically be avoided; their exclusion from Permitted Liens would render the Lien negative covenant commercially unworkable. The purchase money Lien basket of $10,000,000 is consistent with the Permitted Indebtedness basket for capital leases and purchase money obligations. Priority: MEDIUM.
"Sanctioned Person" means any Person that is (a) the subject or target of Sanctions, (b) included on , or (c) located, organized, or resident in a Sanctioned Jurisdiction.
"Sanctions" means economic or financial sanctions or trade embargoes imposed, administered, or enforced from time to time by .
Comment 6. Borrower requests that the Sanctions and Sanctioned Person definitions reference OFAC, EU, and UN sanctions lists specifically, rather than the broader "any governmental authority" formulation in WJA's third draft. The broader formulation could subject the Borrower to sanctions compliance obligations under regimes that have no jurisdictional nexus to TSL or its operations. Additionally, the Borrower proposes excluding secondary sanctions from the scope of the definition to the extent such secondary sanctions lack a specific nexus to TSL's operations. As a Greek shipping company operating globally, TSL is subject to multiple overlapping sanctions regimes, and a narrowly tailored definition is essential to avoid inadvertent triggering. This is a drafting refinement that is linked to Comments 29 and 75 (sanctions-related representations and Events of Default, respectively). Priority: MEDIUM.
"SOFR" means the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator). This definition and all related benchmark provisions have been agreed.
"Swingline Sublimit" means $15,000,000. The Swingline Sublimit is a sublimit of, and not in addition to, the Total Commitments. This definition has been agreed.
"Total Commitments" means, at any time, the aggregate amount of the Commitments of all Lenders at such time, which, as of the Closing Date, shall be $150,000,000. This definition has been agreed.
[Additional defined terms omitted for brevity — all other defined terms in Section 1.01 are in agreed form as of the third draft unless otherwise noted in this markup.]
Section 1.02 — Interpretation
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine, and neuter forms. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, restated, supplemented, or otherwise modified (subject to any restrictions on such amendments, restatements, supplements, or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns, (iii) the words "herein," "hereof," and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections, Exhibits, Schedules, and Annexes shall be construed to refer to Articles, Sections, Exhibits, Schedules, and Annexes of this Agreement, and (v) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights.
(b) Accounting terms not specifically defined herein shall be construed in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").
Status: This Section is in agreed form. No remaining comments.
Section 1.03 — SOFR Provisions
The SOFR benchmark rate provisions, term SOFR conventions, benchmark replacement provisions, and conforming changes language have been fully agreed by the parties following extensive negotiation in connection with the first and second markups. The agreed provisions follow the Alternative Reference Rates Committee (ARRC) recommended hardwired fallback approach and include customary benchmark transition event triggers, benchmark replacement waterfall, benchmark replacement adjustment, and conforming changes authority for the Administrative Agent.
Status: This Section is in fully agreed form. No remaining comments.
ARTICLE II — THE REVOLVING CREDIT FACILITY
Section 2.01 — Revolving Commitments
Subject to the terms and conditions set forth herein, each Lender severally agrees to make revolving credit loans (each, a "Revolving Loan" and collectively, the "Revolving Loans") to the Borrower from time to time during the Availability Period in an aggregate principal amount at any time outstanding not to exceed such Lender's Commitment. The Commitments of each Lender as of the Closing Date are as set forth on Schedule 2.01:
Amounts repaid in respect of Revolving Loans may be reborrowed during the Availability Period subject to the satisfaction of the conditions set forth in Section 4.02.
Status: This Section is in agreed form. No remaining comments.
Section 2.02 — Borrowings; Choice of Interest Rates
Each Revolving Loan shall bear interest at a rate per annum equal to Term SOFR for the applicable Interest Period plus the Applicable Margin, as determined by reference to the pricing grid set forth in the definition of "Applicable Margin." The Applicable Margin shall range from 2.25% to 3.25% based on the Borrower's Consolidated Net Leverage Ratio, as set forth in the pricing grid.
The Borrower may elect Interest Periods of one (1), three (3), or six (6) months for each Term SOFR Loan at the time of each Borrowing Request or upon the expiration of the then-current Interest Period for an outstanding Loan.
Status: This Section is in agreed form. No remaining comments.
Section 2.03 — Borrowing Requests
The Borrower shall deliver an irrevocable Borrowing Request (in substantially the form of Exhibit A) to the Administrative Agent not later than 12:00 noon (New York City time) three (3) Business Days prior to the requested date of each Borrowing (or one (1) Business Day in the case of Swingline Loans), specifying (a) the aggregate principal amount of the requested Borrowing (which shall be in a minimum principal amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof), (b) the requested Borrowing date, and (c) the initial Interest Period applicable thereto.
Status: This Section is in agreed form. No remaining comments.
Section 2.04 — Swingline Loans
The Swingline Lender (Meridian Atlantic Bank, National Association) agrees, subject to the terms and conditions set forth herein, to make swingline loans (each, a "Swingline Loan") to the Borrower from time to time during the Availability Period in an aggregate principal amount at any time outstanding not to exceed the Swingline Sublimit of $15,000,000; provided that the aggregate outstanding principal amount of all Revolving Loans, Swingline Loans, and LC Exposure shall not at any time exceed the Total Commitments.
Status: This Section is in agreed form. No remaining comments.
Section 2.05 — Letters of Credit
(a) General. Subject to the terms and conditions set forth herein, the LC Issuing Bank (Meridian Atlantic Bank, National Association) agrees to issue Letters of Credit for the account of the Borrower from time to time during the Availability Period in an aggregate face amount at any time outstanding not to exceed the LC Sublimit of $20,000,000; provided that the aggregate outstanding principal amount of all Revolving Loans, Swingline Loans, and LC Exposure shall not at any time exceed the Total Commitments.
(b) LC Fees. The Borrower shall pay to the Administrative Agent, for the account of each Lender, a letter of credit fee (the "LC Fee") with respect to each Letter of Credit equal to the Applicable Margin then in effect multiplied by the daily average face amount of such Letter of Credit during the applicable quarter. In addition, the Borrower shall pay to the LC Issuing Bank a fronting fee equal to of the daily average face amount of each outstanding Letter of Credit .
Comment 7. Borrower proposes that the LC fee equal the Applicable Margin, which is the standard formulation for revolving credit facilities and ensures that the Borrower does not pay an additional premium for utilizing the LC sublimit. WJA's third draft set the LC fee at the Applicable Margin plus a 0.125% fronting fee payable to the LC Issuing Bank (Meridian Atlantic), which the Borrower accepts, as fronting fees are customary to compensate the issuing bank for its direct exposure. However, the Borrower requests deletion of the additional 0.25% issuance fee per Letter of Credit, which constitutes an incremental cost not contemplated in the mandate letter and not customary for facilities of this type. The deletion of the issuance fee was proposed in the Borrower's second markup and has not been addressed by WJA in the third draft. Priority: LOW.
Section 2.06 — Prepayments
(a) Voluntary Prepayments. The Borrower may, upon not less than three (3) Business Days' prior irrevocable written notice to the Administrative Agent, prepay the Loans in whole or in part, without premium or penalty, in a minimum principal amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof (or, if less, the entire outstanding principal amount). Each voluntary prepayment shall be applied to the Loans of the Lenders pro rata in accordance with their respective Pro Rata Shares.
(b) Mandatory Prepayments.
(i) Vessel Sale Proceeds. If the Borrower or any Subsidiary sells, transfers, or otherwise disposes of any Mortgaged Vessel (other than in connection with a Permitted Disposition), the Borrower shall prepay the Loans in an amount equal to 100% of the Net Cash Proceeds received therefrom; provided, however, that the Borrower shall not be required to prepay the Loans with such Net Cash Proceeds to the extent that (A) no Default or Event of Default has occurred and is continuing, (B) the Borrower delivers to the Administrative Agent a reinvestment notice within ten (10) Business Days of such sale or disposition certifying the Borrower's intent to reinvest such Net Cash Proceeds in the acquisition of one or more replacement vessels , and (C) such Net Cash Proceeds are so reinvested within following the date of receipt thereof. Any Net Cash Proceeds not so reinvested within such period shall be applied to prepay the Loans.
Comment 8. Borrower continues to request that the reinvestment period for vessel sale proceeds be 365 days, rather than the 270-day period in WJA's third draft. The Borrower's second markup also proposed 365 days, but WJA moved from 180 days (in the first and second drafts) to 270 days in the third draft. While the movement from 180 to 270 days is acknowledged, the Borrower maintains that a 365-day reinvestment period is the market standard for shipping credit facilities and reflects the practical realities of vessel acquisition, which typically involves extended periods of market evaluation, vessel inspection, negotiation, and regulatory approvals. Additionally, the Borrower proposes expanding the permitted uses of reinvested proceeds to include not only the acquisition of replacement vessels but also capital expenditures relating to the Borrower's fleet (e.g., drydocking, retrofitting, scrubber installation). Priority: MEDIUM.
(ii) Insurance and Casualty Proceeds. If the Borrower or any Subsidiary receives any insurance proceeds or condemnation proceeds in respect of any Mortgaged Vessel (including proceeds of hull and machinery insurance, loss of hire insurance, and war risk insurance), the Borrower shall prepay the Loans in an amount equal to 100% of such proceeds; provided, however, that insurance proceeds received in respect of any single casualty event in an amount shall not be subject to mandatory prepayment and may be retained by the Borrower for application to vessel repairs or general corporate purposes.
Comment 9. Borrower proposes that the threshold for exclusion of insurance and casualty proceeds from mandatory prepayment be increased from $2,500,000 (WJA's third draft) to $5,000,000 per occurrence. Given the value of the Mortgaged Vessels (aggregate appraised value of approximately $780,000,000, with individual vessel values ranging from approximately $15,000,000 to $85,000,000) and the routine nature of maritime damage claims, a $2,500,000 threshold is too low and would result in frequent mandatory prepayment events arising from ordinary-course incidents (e.g., minor hull damage, machinery breakdowns) that are routinely repaired and do not impair the overall collateral value. A $5,000,000 threshold is more appropriate and is consistent with market practice for shipping revolving credit facilities. Priority: MEDIUM.
(iii) Excess Cash Flow Sweep.
Comment 10. Agreed. WJA's third draft deleted the excess cash flow sweep provision, which was included in the first and second drafts. The Borrower agrees with this deletion, as excess cash flow sweeps are customary for term loan facilities but not revolving credit facilities. No further comment required.
(iv) Change of Control. Upon the occurrence of a Change of Control, the Borrower shall prepay all outstanding Loans in full, together with all accrued and unpaid interest, fees, and other amounts owing under this Agreement and the other Loan Documents, and provide cash collateral for all outstanding Letters of Credit, in each case within five (5) Business Days following the occurrence of such Change of Control.
Comment 11. The Borrower accepts the concept of mandatory prepayment upon a Change of Control but notes that the threshold for what constitutes a Change of Control remains in dispute (see Comment 1). The mandatory prepayment obligation should be tied to the 50% threshold proposed by the Borrower, not the 40% threshold in WJA's third draft. Priority: HIGH (linked to Comment 1).
Section 2.07 — Commitment Reductions
(a) Voluntary Reductions. The Borrower may, upon not less than three (3) Business Days' prior irrevocable written notice to the Administrative Agent, voluntarily reduce the Total Commitments in whole or in part; provided that (i) any such partial reduction shall be in a minimum amount of and in integral multiples of $1,000,000 in excess thereof, (ii) after giving effect to any such reduction, the aggregate outstanding principal amount of all Revolving Loans, Swingline Loans, and LC Exposure shall not exceed the Total Commitments as so reduced, and (iii) once reduced, the Total Commitments may not be reinstated.
Comment 12. Borrower requests that voluntary commitment reductions be permitted in minimum amounts of $5,000,000, rather than the $10,000,000 minimum in WJA's third draft. A lower minimum provides the Borrower with greater flexibility to right-size the facility as its borrowing needs evolve, and $5,000,000 increments are customary for facilities of this size. Priority: LOW.
Section 2.08 — Fees
(a) Commitment Fee. The Borrower shall pay to the Administrative Agent, for the ratable account of each Lender, a commitment fee (the "Commitment Fee") equal to the Commitment Fee Rate multiplied by the daily average unused amount of such Lender's Commitment during the applicable quarter. The Commitment Fee shall accrue from and including the Closing Date to but excluding the Maturity Date (or, if earlier, the date on which the Total Commitments are terminated in their entirety) and shall be payable quarterly in arrears on the last Business Day of each March, June, September, and December and on the Maturity Date (or such earlier termination date). As set forth in the definition of "Commitment Fee Rate," the Commitment Fee Rate is 0.375% per annum, stepping down to 0.25% per annum when utilization exceeds 50% of Total Commitments.
(b) Upfront Fee. The Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders, a one-time upfront fee of $750,000 (representing 0.50% of the Total Commitments of $150,000,000) on the Closing Date. This fee is agreed pursuant to the mandate letter.
(c) Administrative Agent Fee. The Borrower shall pay to the Administrative Agent an annual administrative agent fee of $75,000, payable on the Closing Date and on each anniversary thereof, for the Administrative Agent's own account.
Status: This Section is in agreed form. No remaining comments.
Section 2.09 — Payments; Pro Rata Treatment; Computations
All payments of principal, interest, fees, and other amounts under this Agreement shall be made to the Administrative Agent, for the account of the applicable Lenders, not later than 2:00 p.m. (New York City time) on the date on which such payment is due, in Dollars and in immediately available funds. The Administrative Agent shall promptly distribute to each Lender its Pro Rata Share of each such payment received. All computations of interest and fees shall be made on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day).
Status: This Section is in agreed form. No remaining comments.
Section 2.10 — Taxes; Increased Costs; Illegality
(a) Gross-Up; Tax Indemnity. All payments by the Borrower under this Agreement and the other Loan Documents shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes, except as required by applicable law. If the Borrower is required by applicable law to deduct or withhold any Taxes from or in respect of any payment made under any Loan Document, the Borrower shall (i) make such deduction or withholding, (ii) pay the full amount deducted or withheld to the relevant governmental authority in accordance with applicable law, and (iii) pay to the applicable Lender such additional amounts as may be necessary so that the net amount received by such Lender after all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this clause) equals the amount that such Lender would have received had no such deduction or withholding been made.
Comment 13. Borrower proposes the introduction of a "Qualifying Lender" concept to limit the Borrower's gross-up obligations in circumstances where a Lender fails to provide the required tax documentation (IRS Forms W-8 or W-9, as applicable) that would enable the Borrower to apply a reduced rate of withholding or an exemption from withholding. This concept is well established in credit agreement practice and ensures that the Borrower is not penalized for a Lender's own failure to comply with its documentation obligations. WJA's third draft partially accepted this concept by including a general obligation on Lenders to provide tax documentation, but the third draft does not tie the Borrower's gross-up obligation to the Lender's compliance with such obligation. The Borrower requests that the linkage be made explicit, as marked above. Priority: MEDIUM.
(b) Increased Costs. If, after the date hereof, any change in applicable law, regulation, or guideline, or the interpretation or application thereof, or compliance by any Lender with any request or directive of any governmental authority (whether or not having the force of law), shall (i) impose, modify, or deem applicable any reserve, special deposit, compulsory loan, insurance charge, or similar requirement against assets of, deposits with or for the account of, or credit extended by, such Lender, (ii) impose on such Lender or the London interbank market any other condition, cost, or expense affecting this Agreement or any Loan made by such Lender hereunder, or (iii) subject such Lender to any Taxes (other than Indemnified Taxes and Excluded Taxes), the Borrower shall pay to such Lender such additional amounts as may be necessary to compensate such Lender for such increased costs; provided, however, that such Lender shall use reasonable efforts to mitigate such increased costs, including by designating a different lending office, if such designation would avoid or reduce such increased costs and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender.
Comment 14. Borrower proposes three limitations on increased costs claims: (A) a 180-day lookback limitation, meaning that a Lender must deliver its increased costs notice within 180 days of becoming aware of the circumstances giving rise to the claim and may not recover costs incurred more than 180 days before such notice; (B) a requirement that the Lender impose similar charges on similarly situated borrowers, to prevent discriminatory application of increased costs provisions; and (C) a mitigation obligation (already partially accepted by WJA in the third draft). WJA's third draft accepted the mitigation obligation (using the word "commercially" before "reasonable efforts," which the Borrower has deleted to strengthen the obligation) but did not accept either the lookback limitation or the similarly-situated-borrower requirement. Both are standard borrower protections. Priority: MEDIUM.
ARTICLE III — REPRESENTATIONS AND WARRANTIES
Status Note: This Article has the highest concentration of remaining open comments — approximately 35 of the 94 total open comments. Many of the disputes in this Article relate to the scope and specificity of representations, materiality qualifiers, and the continuing nature of certain representations.
The Borrower represents and warrants to the Administrative Agent, the Collateral Agent, and each Lender as follows:
Section 3.01 — Organization; Powers
The Borrower is a société anonyme duly organized, validly existing, and in good standing (to the extent such concept is applicable) under the laws of the Hellenic Republic (Greek Tax Identification Number (AFM): 094728361; GEMI Registration No.: 143209501000). Each Guarantor is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization: (a) Thalassa Dry Bulk Holdings Ltd. is organized under the laws of the Republic of Cyprus, (b) Thalassa Tanker Operations Ltd. is organized under the laws of the Republic of the marshall Islands, and (c) Thalassa Logistics International Ltd. is organized under the laws of the Republic of Cyprus. The Borrower and each Guarantor have all requisite corporate or other organizational power and authority to own, lease, and operate their respective properties and to carry on their respective businesses as presently conducted.
Status: This Section is in agreed form. No remaining comments.
Section 3.02 — Authorization; Enforceability
The execution, delivery, and performance by the Borrower and each Guarantor of this Agreement and the other Loan Documents to which it is a party have been duly authorized by all necessary corporate or other organizational action on the part of the Borrower and each such Guarantor. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document to which the Borrower or any Guarantor is a party, when executed and delivered, will constitute, a legal, valid, and binding obligation of the Borrower or such Guarantor, as applicable, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, or other laws affecting creditors' rights generally and to general principles of equity.
Status: This Section is in agreed form. No remaining comments. The enforceability of the Loan Documents will be supported by a Greek-law legal opinion to be issued by Pavlopoulos & Drakos (Athens) and a New York-law legal opinion to be issued by Calderwood & Harkness LLP.
Section 3.03 — No Conflict; Governmental Approvals
(a) No Conflict. The execution, delivery, and performance by the Borrower and each Guarantor of this Agreement and the other Loan Documents to which it is a party do not and will not (i) violate any provision of the organizational documents of the Borrower or any Guarantor, (ii) any applicable law, rule, regulation, order, judgment, or decree binding upon or applicable to the Borrower or any Guarantor, or (iii) .
Comment 15. Borrower requests a materiality qualifier for the no-conflict representation as it relates to contractual obligations (other than the Existing Credit Agreement). The Borrower and its Subsidiaries are parties to hundreds of commercial contracts (charterparties, pooling agreements, management agreements, procurement contracts, port services agreements, and the like), and it is not practicable to confirm the absence of any conflict, breach, or default under all such agreements in connection with the execution of this Agreement. WJA's third draft included a MAE qualifier for governmental approvals (clause (b) below) but did not extend it to contractual conflicts. The Borrower's proposed formulation — which excludes conflicts that would not reasonably be expected to result in a Material Adverse Effect — is the market standard. Priority: MEDIUM.
(b) Governmental Approvals. No consent, approval, authorization, or order of, or filing, registration, or qualification with, any governmental authority is required in connection with the execution, delivery, and performance by the Borrower or any Guarantor of this Agreement or any other Loan Document, except for those that have been obtained or made and are in full force and effect, and except for filings and registrations necessary to perfect the security interests created by the Security Documents, and except for any such consent, approval, authorization, order, filing, registration, or qualification the failure to obtain or make which would not reasonably be expected to result in a Material Adverse Effect.
Section 3.04 — Financial Statements; No Material Adverse Change
(a) Financial Statements. The Borrower has furnished to the Administrative Agent and the Lenders (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 2022, and the related audited consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the fiscal year then ended, in each case accompanied by the report thereon of Hawthorne & Garrett LLP, independent registered public accounting firm (reflecting, among other things, consolidated revenue of approximately $620,000,000 and Consolidated EBITDA of approximately $145,000,000 for fiscal year 2022), and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of March 31, 2023, and the related unaudited consolidated statements of income and cash flows for the three-month period then ended. Such financial statements fairly present, in all material respects, the consolidated financial condition and results of operations of the Borrower and its Subsidiaries as of and for the periods indicated, in accordance with IFRS, subject (in the case of unaudited financial statements) to normal year-end audit adjustments and the absence of footnotes.
(b) No Material Adverse Change. Since December 31, 2022, there has been no event, development, condition, or circumstance that has resulted in, or would reasonably be expected to result in, a Material Adverse Change.
Comment 16. This is one of the Borrower's most significant open points. The Borrower proposes that the "no Material Adverse Change" representation speak as of the Closing Date only and not be required as a condition to each subsequent Borrowing under Section 4.02. WJA's third draft requires the MAC representation to be restated and confirmed as true and correct at the time of each Borrowing, which effectively gives the Lenders an ongoing right to refuse to fund based on an inherently subjective MAC determination. For a revolving credit facility — the essential commercial purpose of which is to provide the Borrower with reliable, committed liquidity — a bring-down MAC representation at each Borrowing is inappropriate and undermines the committed nature of the facility. The Borrower's position is the prevailing market standard for investment-grade and near-investment-grade revolving credit facilities. This comment is linked to Comments 2, 38, and 78. Priority: HIGH — critical open point.
(c) Projections. Any projections, forecasts, or forward-looking financial information delivered by the Borrower to the Administrative Agent and the Lenders in connection with the negotiation of this Agreement were prepared by the Borrower in good faith on the basis of assumptions believed by the Borrower to be at the time of delivery; provided that the Borrower makes no representation or warranty that actual results will conform to such projections or that the assumptions underlying such projections will prove to be correct.
Comment 17. Borrower proposes that projections be subject only to a "reasonable basis" qualifier (i.e., assumptions "believed to be reasonable") and not a "material accuracy" standard. Projections are inherently uncertain, particularly in the shipping industry where freight rates, vessel values, and operating costs are subject to significant volatility. A "reasonable basis" qualifier is the market standard for projection representations. WJA's third draft partially accepted this position by deleting a requirement that projections be "accurate and complete in all material respects" but retained the "materially accurate" standard for assumptions. The Borrower's proposed formulation replaces "materially accurate" with "reasonable." Priority: LOW.
Section 3.05 — Litigation
Except as disclosed on Schedule 3.05 (Disclosed Litigation), there are no actions, suits, proceedings, or investigations pending or, to the knowledge of the Borrower, threatened, against or affecting the Borrower or any of its Subsidiaries in any court or before any arbitrator or governmental authority that (a) , (b) seek injunctive or other equitable relief that could reasonably be expected to have a Material Adverse Effect, or (c) involve any Loan Document or the transactions contemplated hereby.
Comment 18. Borrower requests that the litigation disclosure threshold be increased from $1,000,000 to $5,000,000 for pending or threatened proceedings. The Borrower and its Subsidiaries operate a fleet of 40 vessels engaged in international shipping, and routine litigation (including cargo claims, charter disputes, port state control proceedings, and crew employment disputes) is an inherent feature of the business. A $1,000,000 threshold would require disclosure of a large number of routine matters that are not material to the Borrower's overall financial condition or operations. A $5,000,000 threshold is appropriate for a borrower of TSL's size and complexity. Priority: MEDIUM.
Comment 19. Borrower requests a specific carve-out for routine maritime claims (cargo claims, personal injury claims under P&I coverage, and similar claims) below the disclosure threshold. Such claims are a normal incident of the shipping business, are typically covered by the Borrower's protection and indemnity insurance (maintained through its P&I club), and do not represent a material risk to the Lenders. Requiring disclosure of each such claim would impose an unnecessary administrative burden without corresponding benefit to the Lenders. Priority: LOW.
Section 3.06 — Compliance with Laws
The Borrower and each of its Subsidiaries are in compliance with all applicable laws, rules, regulations, orders, judgments, and decrees of any governmental authority binding upon or applicable to the Borrower or any of its Subsidiaries or their respective properties.
Comment 20. Borrower proposes a "material respects" qualifier for the compliance with laws representation and an exclusion for immaterial non-compliance that is being remediated in the ordinary course. As a global shipping company operating in multiple jurisdictions, the Borrower is subject to an extensive and evolving body of laws and regulations (including flag state requirements, port state control regulations, customs and import/export laws, environmental regulations, employment and labor laws, tax laws, and data privacy regulations). An unqualified compliance representation is not practicable or reasonable. The "in all material respects" qualifier is standard market practice. Priority: MEDIUM.
Section 3.07 — Environmental Matters
Comment 21. Borrower requests that the environmental representations be restructured and narrowed as follows: (a) material compliance with Environmental Laws (adding an "in all material respects" qualifier), (b) no pending or threatened Environmental Claims that would reasonably be expected to result in liability exceeding $3,000,000 (WJA's third draft threshold: $1,000,000), and (c) no known releases of Hazardous Materials from the Mortgaged Vessels requiring remediation in excess of $3,000,000. The Borrower's proposed $3,000,000 threshold reflects the realities of the shipping industry, where environmental incidents (minor spills, fuel leaks, cargo residue) are an inherent operational risk that is managed through insurance and standard operational procedures. A $1,000,000 threshold is too low and would capture routine environmental matters that are not material to the Borrower's financial condition. Priority: MEDIUM.
Comment 22. Borrower objects to WJA's third draft provision that makes compliance with the IMO 2020 sulfur cap (MARPOL Annex VI, Regulation 14) and the EU Emissions Trading System (EU ETS) regulations a standalone representation and, if breached, a standalone Event of Default. While the Borrower takes its environmental obligations seriously and is fully committed to compliance with IMO 2020 and EU ETS requirements, the Borrower's position is that such compliance should be addressed through the general compliance with laws representation (Section 3.06) and should not be elevated to a separate, standalone obligation. Singling out specific regulatory requirements in this manner creates an asymmetric risk for the Borrower and is not consistent with market practice. Priority: MEDIUM.
Section 3.08 — Taxes
The Borrower and each of its Subsidiaries have filed all required to be filed and have paid all due and payable by them, .
Comment 23. Borrower requests that the tax representation include (a) a materiality threshold (filing of "material" tax returns, payment of "material" taxes) and (b) a carve-out for taxes being contested in good faith with adequate reserves. As a Greek entity with operations in multiple jurisdictions, the Borrower is subject to complex and often overlapping tax regimes. The "contest in good faith" carve-out is standard in credit agreements and reflects the practical reality that tax disputes are common and do not, in and of themselves, indicate a material compliance failure. Priority: LOW.
Section 3.09 — ERISA / Employee Benefit Matters
Comment 24. Borrower notes that as a Greek société anonyme, ERISA does not apply to the Borrower directly. The ERISA representations should be limited to any U.S. Subsidiaries or U.S. operations of the Borrower (if any). For the Borrower's Greek operations, compliance with Greek social security and pension requirements should be addressed separately with an appropriate materiality qualifier. WJA's third draft applied the full suite of ERISA representations to the Borrower as if it were a U.S. entity, which is not appropriate. The Borrower proposes restructuring this Section into two subsections: one addressing ERISA (to the extent applicable) and one addressing Greek social security and pension compliance. Priority: LOW.
Section 3.10 — Ownership of Property; Liens