MEMORANDUM
PRIVILEGED & CONFIDENTIAL — INTERNAL ADMINISTRATIVE USE ONLY
TO: Firm Administration / New Matter Intake Department, Calderwood & Harkness LLP
FROM: Amy Chesterton, Associate, Bankruptcy & Restructuring Group
DATE: October 25, 2022
RE: New Matter Opening — Thalassa Shipping & Logistics SA / Thalassa Americas Inc. — Chapter 11 Contingency Planning & Out-of-Court Restructuring Advisory
MATTER NUMBER: 1044-00003
RESPONSIBLE PARTNER: Nathaniel Bower
BILLING PARTNER: Colette Whitman
1. Purpose
This memorandum is submitted to the Firm Administration and New Matter Intake Department of Calderwood & Harkness LLP for the purpose of opening a new client matter in the firm's matter management system under Matter Number 1044-00003. The memorandum provides the requisite information regarding client identification, matter classification, engagement scope, billing arrangements, team staffing, counterparty identification, and related administrative details necessary for the intake process.
The engagement involves a dual-track restructuring advisory for Thalassa Shipping & Logistics Société Anonyme ("TSL" or "Thalassa"), a Greek-headquartered shipping conglomerate, and its wholly-owned U.S. operating subsidiary, Thalassa Americas Inc. ("TAI"). Specifically, the firm has been retained to provide legal advisory services in connection with (i) Chapter 11 contingency planning for TAI, including preparation of all necessary petition materials and first-day pleadings, analysis of debtor-in-possession financing alternatives, and related bankruptcy planning, and (ii) the negotiation and documentation of a comprehensive out-of-court restructuring of the consolidated capital structure of TSL and TAI, including amendments to senior secured credit facilities, restructuring of mezzanine debt, treatment of unsecured notes, and related transactional matters.
The Engagement Letter was executed on October 25, 2022, by Georgios Andreadis, Chief Executive Officer of TSL, and Marcus Hale, President of TAI, on behalf of the client entities, and by Nathaniel Bower and Colette Whitman on behalf of the firm. Pursuant to the terms of the Engagement Letter, a retainer in the amount of $500,000 is expected to be deposited by October 28, 2022 into the firm's Interest on Lawyers' Trust Account (IOLTA) maintained at Greaves Bancorp
A separate Conflicts Clearance Memorandum was prepared and circulated under the supervision of the firm's General Counsel's office, dated October 23, 2022. That memorandum confirms that a comprehensive conflicts search was conducted across all firm databases and that clearance has been obtained to proceed with the representation of both TSL and TAI, subject to the conditions and waivers documented therein. No further conflicts action is required at this time, although the matter team will continue to monitor for new conflicts as additional parties are identified during the course of the engagement.
2. Client Identification
2.1 Primary Client — Thalassa Shipping & Logistics Société Anonyme
Full Legal Name: Thalassa Shipping & Logistics Société Anonyme
Short Name / Abbreviation: TSL or Thalassa
Entity Type: Société Anonyme (SA) organized and existing under the laws of the Hellenic Republic (Greece)
Jurisdiction of Organization: Hellenic Republic (Greece); registered with the Athens General Commercial Registry (Γ.Ε.ΜΗ.)
Greek Tax Identification Number (AFM): 998214763
Headquarters: 42 Akti Miaouli, Piraeus 18538, Greece
Year Founded: 1987
Founding Family: The Kostandinos family established TSL in 1987 as a single-vessel dry-bulk carrier operation based in Piraeus. Over the ensuing three and a half decades, the company expanded through a combination of organic fleet growth, strategic vessel acquisitions, and the development of an integrated logistics and terminal operations business.
Business Description: TSL owns and operates a diversified fleet of 50 vessels, comprising 38 dry-bulk carriers (ranging from Handysize to Capesize classes) and 12 container vessels (primarily feeder and intermediate classes). In addition to its core vessel ownership and chartering operations, TSL provides integrated port-to-door logistics services across the Mediterranean basin, the Black Sea region, and transatlantic trade lanes. The company operates terminal facilities at the Port of Piraeus, the Port of Thessaloniki, and the Port of Houston (the latter through its U.S. subsidiary, TAI). TSL's revenue model is weighted toward time-charter and spot-charter earnings, supplemented by logistics service fees and terminal handling charges.
Financial Overview:
• Revenue (FY2021): €1.42 billion
• Revenue (FY2022 estimated): €987 million, representing a decline of approximately 30.5% year-over-year, driven primarily by the deterioration in global dry-bulk freight rates and reduced container volumes on transatlantic routes
• Total Consolidated Debt (as of September 30, 2022): Approximately $847.3 million across all funded debt facilities, inclusive of the Senior Secured Credit Facility, mezzanine notes, senior unsecured notes, and the intercompany note owed by TAI to TSL
• Employees: Approximately 4,200 globally, of which approximately 680 are based in the United States (predominantly at the Houston terminal and TAI's Houston corporate offices)
Key Principals:
• Dimitrios Kostandinos — Chairman of the Board of Directors. Mr. Kostandinos is the founder's eldest son and has served as Chairman since 2003. He holds approximately 62% of the equity of TSL through KFO Holdings Société Anonyme ("KFO"), the Kostandinos family holding company.
• Elena Kostandinos-Pavlou — Vice Chairwoman of the Board of Directors. Ms. Kostandinos-Pavlou is the founder's daughter and holds approximately 18% of the equity of TSL through KFO. She is primarily responsible for oversight of the company's corporate social responsibility initiatives and crew welfare programs.
• Georgios Andreadis — Chief Executive Officer. Mr. Andreadis is a non-family professional manager who was appointed CEO in 2015 after a distinguished career in the international shipping industry. He previously served as Managing Director of Helios Maritime Partners S.A. and as a senior executive at Stonefield Partners LLC. He is the primary day-to-day client contact for this engagement.
• Irini Dalakoura — Chief Financial Officer. Ms. Dalakoura joined TSL in 2018 from the Meridian Maritime Advisory Group, where she served as a Director specializing in shipping finance. She is the designated billing contact for invoicing purposes and will serve as the principal financial liaison to the firm's engagement team.
• Stavros Papageorgiou — General Counsel (Greece). Mr. Papageorgiou oversees all Greek legal matters for TSL and is the primary point of coordination with TSL's Greek counsel, Vassiliou & Demetriou Law Offices.
2.2 Co-Client — Thalassa Americas Inc.
Full Legal Name: Thalassa Americas Inc.
Short Name / Abbreviation: TAI
Entity Type: C-Corporation organized under the General Corporation Law of the State of Delaware
Jurisdiction of Organization: Delaware, United States of America
Employer Identification Number (EIN): 84-3291057
Registered Agent: Capitol Registered Agents LLC, 1209 Orange Street, Wilmington, Delaware 19801
Principal Office: 1400 McKinney Street, Suite 2200, Houston, Texas 77010
Relationship to TSL: TAI is a wholly-owned subsidiary of TSL. TSL holds 100% of the issued and outstanding shares of common stock of TAI. TAI was incorporated in Delaware in 2016 to consolidate TSL's existing U.S. operations under a single domestic corporate entity.
Business Description: TAI manages and operates the U.S.-side business of the TSL group, including the operation and management of the Houston terminal facility (located at the Barbours Cut Terminal complex), scheduling and coordination of Jones Act–exempt foreign-flag vessel calls at U.S. ports, and a domestic freight brokerage operation that arranges inland transportation for cargo discharged at the Houston terminal and other Gulf Coast ports. TAI employs approximately 680 individuals in the United States.
Financial Overview:
• Revenue (FY2021): $312 million
• Revenue (FY2022 estimated): $198 million, representing a decline of approximately 36.5% year-over-year, attributable to reduced vessel call volumes, lower terminal throughput, and softer demand in the domestic freight brokerage segment
• Intercompany Debt Owed to TSL: $76.4 million subordinated intercompany promissory note bearing interest at 5.0% per annum, issued to fund TAI's terminal expansion and equipment acquisition program in 2019–2020. The intercompany note is subordinated to all external funded indebtedness of TAI pursuant to the terms of the Intercreditor Agreement dated June 15, 2019.
Key Officers:
• Marcus Hale — President of TAI. Mr. Hale is an experienced maritime and logistics executive who has served as President since TAI's incorporation in 2016. He is authorized to execute documents on behalf of TAI and is a signatory to the Engagement Letter.
• Diana Restrepo — Vice President, Finance. Ms. Restrepo oversees all financial reporting, treasury, and tax compliance functions for TAI.
• Jonathan Kurtz — Vice President, Operations. Mr. Kurtz is responsible for terminal operations, vessel scheduling, and freight brokerage activities at the Houston facility and across TAI's U.S. operational footprint.
2.3 Related Entity — KFO Holdings Société Anonyme
Full Legal Name: KFO Holdings Société Anonyme
Short Name: KFO
Entity Type: Société Anonyme (SA) organized under Greek law; functions as the Kostandinos family's private holding company
Headquarters: 42 Akti Miaouli, Piraeus 18538, Greece (located in the same building as TSL's corporate headquarters)
Role: KFO is the combined equity holder of approximately 80% of the outstanding share capital of TSL. Dimitrios Kostandinos holds approximately 62% of TSL's equity through KFO, and Elena Kostandinos-Pavlou holds approximately 18% through the same vehicle. The remaining 20% of TSL's equity is held by a combination of Greek institutional investors, members of TSL's senior management team, and certain legacy investors.
It is important to note that KFO is not a direct client of the firm in this engagement. KFO is identified herein solely as a related party whose interests are generally aligned with those of the client entities, TSL and TAI. No separate representation of KFO has been undertaken, and no attorney-client relationship exists between Calderwood & Harkness and KFO. This distinction has been communicated to all relevant parties and is documented in the Engagement Letter.
3. Matter Classification and Engagement Scope
3.1 Practice Group / Matter Type
Practice Group: Bankruptcy & Restructuring
Matter Type: Chapter 11 Contingency Planning and Out-of-Court Restructuring Advisory
Cross-Practice Involvement: The engagement will require the involvement of the firm's Tax practice group. Sylvia Hartwell, a Specialist Partner in the Tax group, has been identified to lead the tax advisory workstream. A supplemental engagement letter covering the tax advisory scope is expected to be executed on or about November 5, 2022. Until such supplemental engagement letter is in place, all time incurred by Ms. Hartwell and any Tax group associates on this matter should be recorded to Matter Number 1044-00003 and will be covered under the primary Engagement Letter.
No other cross-practice involvement is anticipated at this time, although it is possible that the firm's Real Estate or Capital Markets groups may be consulted on discrete issues as they arise (e.g., terminal lease analysis, securities law compliance for any exchange offer or consent solicitation). Any such involvement would be coordinated through the Responsible Partner.
3.2 Scope of Engagement
As set forth in the Engagement Letter dated October 25, 2022, addressed jointly to Georgios Andreadis (CEO, TSL) and Marcus Hale (President, TAI), the scope of the firm's engagement encompasses four principal workstreams, each of which is described in detail below.
Workstream 1 — Chapter 11 Contingency Planning for TAI
The firm will prepare a comprehensive contingency plan for a potential voluntary filing by TAI under Chapter 11 of the United States Bankruptcy Code (Title 11, U.S.C.) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The contingency planning workstream will include, without limitation, the following:
• Drafting of the voluntary petition under Section 301 of the Bankruptcy Code, including all required schedules and statements of financial affairs;
• Preparation of a complete set of first-day motions and supporting declarations, including motions for authority to use cash collateral and/or obtain debtor-in-possession ("DIP") financing, motions for authority to pay critical vendors, motions regarding employee wages and benefits, motions for cash management procedures, and all other customary first-day relief;
• Analysis of DIP financing structures and potential DIP lender outreach, including review of priming lien issues and adequate protection obligations;
• Engagement planning for a Chief Restructuring Officer ("CRO"), in coordination with Alderney Management Advisors LLC, the standby CRO provider;
• Venue analysis, including assessment of whether the Houston Division of the Southern District of Texas is the optimal forum, and consideration of alternative venues;
• Comprehensive review of TAI's executory contracts and unexpired leases under Section 365 of the Bankruptcy Code, with particular focus on terminal operating agreements, vessel charter agreements, and freight brokerage contracts;
• Analysis of preference exposure under Section 547 and fraudulent transfer exposure under Sections 548 and 544(b) of the Bankruptcy Code, including examination of intercompany transfers between TSL and TAI;
• Assessment of intercompany claims and the risk of substantive consolidation between TSL and TAI;
• Directors' and officers' liability analysis, including review of fiduciary duties under applicable Delaware corporate law and the Bankruptcy Code, and evaluation of existing D&O insurance coverage under the Promontory Indemnity Insurance Co. policy (Policy No. PII-DO-2022-08847, $25 million aggregate limit);
• Critical vendor analysis, including identification and prioritization of essential trade creditors;
• Maritime lien analysis, including review of potential liens arising under the Commercial Instruments and Maritime Liens Act (46 U.S.C. §§ 31301–31343) and their treatment in bankruptcy.
Workstream 2 — Out-of-Court Restructuring Advisory
The firm will advise TSL and TAI in connection with the negotiation and documentation of a comprehensive out-of-court restructuring of the consolidated capital structure, with the objective of reaching agreement with all major creditor constituencies and avoiding the necessity of a Chapter 11 filing. This workstream will include, without limitation:
• Ongoing analysis of the Forbearance Agreement executed October 10, 2022, with the Senior Secured Lender syndicate, including monitoring compliance with forbearance conditions, advising on extensions, and negotiating any amendments to the forbearance terms;
• Drafting and negotiation of a Restructuring Support Agreement ("RSA") among TSL, TAI, the Senior Secured Lender syndicate (or, as applicable, the Ad Hoc Group of Senior Secured Lenders), Dralvecen Mezzanine Capital LLC, and the holders of the Senior Unsecured Notes;
• Preparation of RSA term sheets, mark-ups, and definitive documentation;
• Negotiation and documentation of amendments to the $685 million Senior Secured Credit Facility (inclusive of the Term Loan A, Revolving Credit Facility, and Term Loan B), including potential maturity extensions, covenant relief, amortization modifications, and interest rate adjustments;
• Negotiation and documentation of the restructuring of the $112.3 million mezzanine notes held by Dralvecen Mezzanine Capital LLC, potentially including a debt-for-equity exchange, partial cash paydown, interest rate adjustments, and/or maturity extensions;
• Analysis and negotiation of the treatment of the $50 million Senior Unsecured Notes due March 1, 2025, including potential exchange offer or consent solicitation structures;
• Documentation of any new equity contributions by existing shareholders or third-party investors;
• Analysis and negotiation of any asset dispositions contemplated as part of the restructuring, including potential vessel sales, terminal divestitures, or sale-leaseback transactions;
• Preparation of all ancillary transaction documents, including amended and restated intercreditor agreements, security documents, legal opinions, officer's certificates, and closing deliverables.
Workstream 3 — Cross-Border Coordination
The firm will coordinate with TSL's Greek counsel, Vassiliou & Demetriou Law Offices (lead partner: Alexandros Vassiliou), on all matters implicating Greek insolvency law and cross-border restructuring considerations, including:
• Analysis of the implications of Greek insolvency law under Law 4738/2020 (the Greek Debt Settlement & Insolvency Code, commonly referred to as the "New Greek Insolvency Code") for the proposed restructuring, including the availability of ratification procedures for out-of-court restructuring agreements and the consequences of a potential Greek insolvency proceeding for TSL;
• Assessment of Chapter 15 recognition issues, including analysis of TSL's center of main interests ("COMI") for purposes of Section 1516 of the Bankruptcy Code, and preparation of a Chapter 15 recognition petition if warranted;
• Review of any required Greek regulatory filings, including notifications to the Hellenic Financial Stability Fund (if applicable), the Hellenic Competition Commission, and any maritime regulatory authorities.
Workstream 4 — Tax Structuring Advice
Under the direction of Sylvia Hartwell, Specialist Partner in the Tax group, the firm will provide tax structuring advice in connection with the restructuring, including:
• Analysis of cancellation-of-debt income ("CODI") implications and the availability of exclusions under Section 108 of the Internal Revenue Code (including the insolvency exclusion and, if applicable, the Title 11 exclusion);
• Cross-border tax analysis under the United States–Greece Income Tax Treaty, including withholding tax considerations for interest and principal payments, controlled foreign corporation ("CFC") and Subpart F income implications, and transfer pricing considerations in connection with the intercompany note between TAI and TSL;
• Tax treatment of PIK capitalized interest on the mezzanine notes;
• Tax characterization of amendment and consent fees payable to creditors in connection with the restructuring.
This workstream will be covered under a supplemental engagement letter with Sylvia Hartwell, which is anticipated to be executed on or about November 5, 2022.
3.3 Background Summary of the Liquidity Crisis
The following is a summary of the key events and circumstances giving rise to the current liquidity crisis at TSL and TAI, provided for context and administrative reference.
Trigger Events
The global dry-bulk shipping market has experienced a sharp downturn during calendar year 2022. The Baltic Dry Index ("BDI"), a widely tracked composite index of shipping rates across multiple vessel classes published by the Baltic Exchange in London, declined approximately 58% between January 2022 and September 2022. This decline has been driven by a confluence of factors, including the slowdown of the Chinese economy (particularly in the real estate and infrastructure sectors), the disruption of grain trade flows resulting from the conflict in Ukraine, and the broader global macroeconomic headwinds associated with rising interest rates, persistent inflation, and recessionary pressures in key European and North American markets.
The impact on TSL's earnings has been severe. TSL's average daily time-charter equivalent ("TCE") rate fell from approximately $24,800 per day (the FY2021 average across the fleet) to approximately $11,200 per day (the Q3 2022 average), a decline of approximately 55%. This precipitous decline in charter revenue, combined with a fixed cost base that includes significant vessel operating expenses, dry-docking obligations, and debt service requirements, has resulted in a rapid erosion of liquidity and the breach of multiple financial covenants under the Senior Secured Credit Facility.
Covenant Breaches
As of the most recently completed quarterly reporting period (September 30, 2022), TSL and TAI are in breach of the following financial covenants under the Senior Secured Credit Facility:
• Minimum Liquidity Covenant: Breached on September 15, 2022, when the group's unrestricted cash and cash equivalents declined to $27.3 million, representing a shortfall of $12.7 million against the $40.0 million minimum liquidity threshold established under Section 7.11(a) of the Credit Agreement.
• Maximum Net Leverage Ratio: Breached as of the quarterly test date of September 30, 2022, with a Net Leverage Ratio of 7.82x (calculated as Net Debt of $770.9 million divided by Last Twelve Months ("LTM") Adjusted EBITDA of $98.6 million), compared to the maximum permitted ratio of 5.50x under Section 7.11(b) of the Credit Agreement.
• Minimum Interest Coverage Ratio: Breached as of the quarterly test date of September 30, 2022, with an Interest Coverage Ratio of 1.74x (calculated as LTM Adjusted EBITDA of $98.6 million divided by LTM Cash Interest Expense of $56.7 million), compared to the minimum required ratio of 2.50x under Section 7.11(c) of the Credit Agreement.
These covenant breaches constitute Events of Default under the Credit Agreement and, absent the forbearance described below, would entitle the Senior Secured Lender syndicate to exercise remedies, including acceleration of outstanding indebtedness and enforcement against collateral (which includes vessel mortgages, assignment of charter earnings, and pledges of the equity interests in TAI and certain other subsidiaries).
Forbearance Agreement
On October 10, 2022, TSL and TAI entered into a Forbearance Agreement with the Senior Secured Lender syndicate, pursuant to which the lenders agreed to a 90-day standstill period through January 8, 2023. During the standstill period, the lenders have agreed to forbear from exercising their rights and remedies with respect to the existing Events of Default, subject to compliance by TSL and TAI with specified forbearance conditions, including a minimum cash threshold, limitations on capital expenditures, restrictions on intercompany transfers, and periodic financial reporting obligations.
Calderwood & Harkness was engaged following the execution of the Forbearance Agreement and was not involved in its negotiation or drafting. However, the firm will advise on compliance with the forbearance terms, negotiate any extensions to the standstill period beyond January 8, 2023, and prepare for the possibility that the forbearance may not be extended.
Fleet Valuation Context
TSL's fleet of 50 vessels was last appraised at an aggregate value of approximately $891 million in January 2022 by Drakos Maritime Valuations Ltd. Given the significant decline in vessel values across the dry-bulk and container segments during 2022, an updated fleet appraisal has been commissioned and is expected to be delivered by Captain Nikos Drakos of Drakos Maritime Valuations Ltd. in early November 2022. The updated appraisal will be critical to the restructuring analysis, as vessel values form the primary basis for the loan-to-value calculations under the Credit Agreement and will inform the negotiating positions of all creditor constituencies.
4. Key Counterparties and Adverse/Interested Parties
All parties identified in this section have been cleared through the firm's conflicts management system in connection with the Conflicts Clearance Memorandum dated October 23, 2022. No conflicts were identified that would prevent the firm from proceeding with this engagement, and no additional waivers were required beyond those documented in the Engagement Letter with respect to the joint representation of TSL and TAI.
4.1 Senior Secured Lender Syndicate
Administrative Agent and Collateral Agent:
Nordbank International AG Bahnhofstrasse 78, 8001 Zürich, Switzerland Key Contact: Henrik Lüdemann, Managing Director, Shipping & Offshore Finance Nordbank serves as both the Administrative Agent and the Collateral Agent under the Senior Secured Credit Facility. Nordbank is the single largest lender in the syndicate, holding $137 million in commitments.
Syndicate Members (8 additional institutions):
The Senior Secured Credit Facility is syndicated among a total of nine lending institutions (including Nordbank as agent). The remaining eight syndicate members, their respective commitment amounts, and key contacts are as follows:
1. Aegean Capital Bank SA — Athens, Greece; $110 million commitment; Key Contact: Nikolaos Ventouris, Head of Shipping Finance
2. Harborstone Bank plc — London, United Kingdom; $95 million commitment; Key Contact: Fiona Aldrich, Director, Structured Shipping Finance
3. Pacifica Trade Finance Corp. — Singapore; $82 million commitment; Key Contact: Wei Lin Tan, Senior Vice President, Maritime Lending
4. Continental Maritime Lending GmbH — Hamburg, Germany; $72 million commitment; Key Contact: Klaus Rheinfeld, Managing Director
5. Triton Credit Partners LP — New York, New York; $68 million commitment; Key Contact: David Sorokin, Partner
6. Laurentian Shipping Fund II — Montreal, Canada; $55 million commitment; Key Contact: Marie-Claire Gagnon, Portfolio Manager
7. Caspian Asset Management Ltd. — Dubai, United Arab Emirates; $40 million commitment; Key Contact: Rashed Al-Khatib, Director of Credit
8. Pelagos Institutional Credit Fund — Limassol, Cyprus; $26 million commitment; Key Contact: Andreas Michailides, Investment Manager
Total Senior Secured Facility Commitment: $685 million. As of September 30, 2022, the total outstanding balance under the Senior Secured Credit Facility was $540 million, comprised of $270 million outstanding under Term Loan A, $185 million outstanding under the Revolving Credit Facility, and $85 million outstanding under Term Loan B.
Ad Hoc Group of Senior Secured Lenders:
An informal ad hoc group of the largest senior secured lenders was formed in August 2022, following the initial reports of covenant compliance difficulties. The Ad Hoc Group comprises four institutions:
• Nordbank International AG — $137 million
• Harborstone Bank plc — $95 million
• Continental Maritime Lending GmbH — $72 million
• Triton Credit Partners LP — $68 million
The Ad Hoc Group collectively holds $372 million of the $685 million facility, representing approximately 54.3% of total commitments. The Ad Hoc Group has retained independent legal and financial advisors and is expected to be the primary negotiating counterparty for the restructuring.
Counsel to the Ad Hoc Group:
Whitfield, Crane & Burgess LLP 51 West 52nd Street, 38th Floor New York, New York 10019 Lead Partner: Graham Whitfield III Senior Associate: Priya Nandakumar
Financial Advisor to the Ad Hoc Group:
Draycott Advisory Group LLC 520 Madison Avenue, 20th Floor New York, New York 10022 Key Contact: Vanessa Chow, Partner
4.2 Mezzanine Lender
Dralvecen Mezzanine Capital LLC ("BMC")
600 Lexington Avenue, 22nd Floor New York, New York 10022 Senior Partner: Rebecca Quimby
BMC is the sole holder of the $112.3 million second-lien mezzanine notes. The original principal amount of the mezzanine notes was $100 million, with the current outstanding balance reflecting $12.3 million in PIK capitalized interest that has been added to principal since issuance. The mezzanine notes bear interest at a rate of 11.5% per annum on a PIK toggle basis (i.e., the borrower has the option to pay interest in cash or to capitalize interest as additional principal) and mature on December 15, 2024. The mezzanine notes are secured by a second-priority lien on the same collateral package that secures the Senior Secured Credit Facility, subject to the terms of the Intercreditor Agreement dated June 15, 2019.
Counsel to BMC:
Kellner & Foss LLP 1185 Avenue of the Americas, 30th Floor New York, New York 10036 Lead Partner: Theodore Kellner Associate: Samantha Ong
4.3 Unsecured Noteholders
Senior Unsecured Notes:
$50 million aggregate principal amount of 8.25% Senior Unsecured Notes due March 1, 2025 CUSIP: 87265BAB5 Interest is payable semi-annually in cash on March 1 and September 1 of each year.
The Senior Unsecured Notes were issued on March 1, 2020, pursuant to an Indenture between TSL (as issuer), TAI (as guarantor), and Garrison Trust Company (as indenture trustee). The notes are unsecured and rank junior to all existing and future senior secured indebtedness of TSL and TAI.
Indenture Trustee:
Garrison Trust Company 100 Wall Street, 16th Floor New York, New York 10005
Counsel to Informal Group of Unsecured Noteholders:
An informal group of holders of the Senior Unsecured Notes has retained independent counsel:
Ashford, Brightmoor Group & McKay PC 299 Park Avenue, 18th Floor New York, New York 10171 Lead Partner: Carolyn Brightmoor Group Associate: Robert Mancini
4.4 Significant Trade Creditors
As of September 30, 2022, TSL and TAI have approximately $38.7 million in outstanding trade payables on a consolidated basis. A detailed trade creditor analysis will be conducted as part of the Workstream 1 (Chapter 11 contingency planning) critical vendor review.
The single largest trade creditor is:
Olympian Fuel & Supply SA 7 Iroon Polytechniou, Piraeus 18535, Greece Amount Owed: $9.2 million (bunker fuel supplier)
Olympian Fuel & Supply is a major bunker fuel supplier to the TSL fleet and is considered a critical trade vendor. The treatment of Olympian's outstanding balance, and the continuation of its supply relationship, will be a significant consideration in both the out-of-court restructuring and the Chapter 11 contingency planning workstreams.
5. Engagement Team
The following attorneys have been designated to staff this matter. Team members, their roles, practice group affiliations, and applicable 2022 standard billing rates are set forth in the table below:
Paralegals will be assigned to the matter as needed and will be billed at a standard rate of $425 per hour. Paralegal staffing is expected to include at least one full-time paralegal to support document management, due diligence organization, and closing mechanics.
Additional associates or of counsel attorneys may be staffed on the matter as the engagement progresses, particularly if a Chapter 11 filing becomes necessary and the litigation and court appearance workload increases. All additional staffing decisions are subject to the approval of Nathaniel Bower (Responsible Partner) and Colette Whitman (Billing Partner).
A separate Staffing Plan and Budget Estimate Memorandum is being prepared by Colette Whitman and is expected to be circulated on or about October 26, 2022. That memorandum will set forth a more detailed staffing plan, including projected hours by team member and workstream, and a refined budget estimate based on the anticipated timeline and scope of the engagement.
6. Billing Arrangements
6.1 Billing Rates
The following standard hourly billing rates apply to this engagement for 2022:
• Partners: $1,650 per hour
• Senior Associates: $1,050 per hour
• Associates: $850 per hour
• Paralegals: $425 per hour
These rates are the firm's standard rates for the Bankruptcy & Restructuring group and are consistent with the rates set forth in the executed Engagement Letter. The Engagement Letter does not provide for any discounted, blended, or alternative fee arrangements. Rates are subject to adjustment in accordance with the firm's annual rate review process, typically effective January 1 of each calendar year. Any rate increases will be communicated to the client in advance.
6.2 Retainer. Pursuant to the Engagement Letter, TSL has agreed to deposit a retainer in the amount of $500,000 into the firm's IOLTA account. The retainer deposit is expected to be received by wire transfer on or before October 28, 2022. The Finance Department should confirm receipt of the retainer and notify the undersigned and Colette Whitman upon receipt.
The retainer will be held in the firm's IOLTA account and will be applied against the final invoice(s) rendered in connection with this matter, unless the firm and the client otherwise agree in writing. The retainer is not a cap on fees and does not limit the client's obligation to pay for legal services rendered in excess of the retainer amount.
6.3 Invoicing. Invoices will be rendered on a monthly basis, in arrears, for all professional fees and disbursements incurred during the preceding calendar month. All invoices will be directed to:
Irini Dalakoura Chief Financial Officer Thalassa Shipping & Logistics Société Anonyme 42 Akti Miaouli, Piraeus 18538, Greece
Email: i.dalakoura@thalassashipping.gr
Disbursements will be billed at cost, without markup. Typical disbursements anticipated in this matter include, but are not limited to, travel expenses (including international travel to Piraeus and Athens, Greece, and domestic travel to Houston, Texas), court filing fees, document production and reproduction costs, electronic database and research service charges, courier and express delivery fees, and similar out-of-pocket expenses. The Engagement Letter provides that disbursements in excess of $5,000 individually will be communicated to the client in advance where practicable.
Payment terms are net 30 days from the date of invoice, as set forth in the Engagement Letter.
6.4 Fee Arrangements with Other Advisors (for Reference)
For the convenience of the New Matter Intake Department and the Finance Department, the following is a summary of the fee arrangements between TSL/TAI and their other principal professional advisors. These arrangements are provided for reference only and do not constitute billing obligations of Calderwood & Harkness.
Kensington Veltrian Partners LLC (Financial Advisor to TSL/TAI):
• Monthly advisory fee: $250,000 per month, commencing October 2022
• Completion fee: $4.5 million, payable upon execution of a Restructuring Support Agreement (or substantially similar definitive restructuring agreement) by all requisite parties
• Alternative filing fee: $2.0 million, payable upon the filing of a voluntary petition under Chapter 11 of the Bankruptcy Code by TAI (in lieu of the completion fee if the out-of-court path is abandoned)
Alderney Management Advisors LLC (Standby CRO Provider):
• CRO Designee: Richard "Rick" Thornberg
• Alderney has been identified as the standby provider of a Chief Restructuring Officer in the event that a Chapter 11 filing becomes necessary. A formal engagement agreement with Alderney is expected to be finalized only if and when a Chapter 11 filing is imminent. The terms of the CRO engagement have not yet been finalized.
7. Other Retained Advisors and Service Providers
The following table sets forth the other professional advisors and service providers retained or expected to be retained by TSL and/or TAI in connection with the restructuring:
The standby engagement with Pendleton Claim Services Inc. for claims and noticing agent services is expected to be signed on or about November 15, 2022. Pendleton would serve as the claims agent and noticing agent in a Chapter 11 case, responsible for maintaining the claims register, processing proofs of claim, managing noticing requirements, and providing related administrative services. The standby engagement is a contingency measure and will be activated only if a Chapter 11 filing occurs.