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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 780 Third Avenue New York, NY 10017

Matter No.: 1044-00003

MEMORANDUM

Date: January 25, 2023

To: Georgios Andreadis, Chief Executive Officer, Thalassa Shipping & Logistics SA Dimitrios Kostandinos, Chairman of the Board, Thalassa Shipping & Logistics SA / KFO Holdings SA

From: Nathaniel Bower, Partner Amy Chesterton, Associate

Re: Restructuring Support Agreement — Negotiation Strategy and Stakeholder Analysis

This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the named recipients and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

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I. Executive Summary

This memorandum provides a comprehensive analysis of the negotiating positions, motivations, and likely demands of each creditor constituency in the Thalassa Shipping & Logistics SA ("TSL") capital structure, and recommends a strategy for achieving an out-of-court restructuring through a Restructuring Support Agreement ("RSA"), thereby averting a Chapter 11 filing by Thalassa Americas Inc. ("TAI"), TSL's principal U.S. operating subsidiary.

TSL faces a severe liquidity crisis driven by a prolonged and deepening contraction in the global dry-bulk shipping market. Revenue declined from €1.42 billion in fiscal year 2021 to an estimated €987 million in fiscal year 2022, representing a decline of approximately 30.5%. This deterioration is directly attributable to the collapse in dry-bulk charter rates: the Baltic Dry Index ("BDI") declined approximately 58% between January 2022 and September 2022, and TSL's average daily time charter equivalent ("TCE") fell from $24,800 per day to $11,200 per day in the third quarter of 2022. These market conditions have dramatically compressed TSL's earnings, cash flow generation capacity, and asset values across the entire fleet.

As of September 30, 2022, TSL's consolidated total debt stands at approximately $847.3 million, measured against a fleet appraised at $623 million by Drakos Maritime Valuations (report dated November 1, 2022), which is itself down from $891 million in January 2022 — a decline of approximately $268 million, or 30.1%, in less than ten months. Kensington Veltrian Partners LLC ("KHP"), TSL's financial advisor, has estimated the enterprise value of the TSL group at $580 million to $640 million, with a midpoint of $610 million. These figures underscore that the company is deeply overleveraged relative to current market conditions and that multiple creditor classes are impaired on a mark-to-market basis.

The forbearance agreement executed on October 10, 2022 — providing for a 90-day standstill among the senior secured lenders — was extended once to March 8, 2023. While a further extension may be sought if negotiations require additional time, such an extension cannot be taken for granted. The Ad Hoc Group of Senior Secured Lenders and their advisors have signaled growing impatience with the pace of discussions, and any further extension will likely require meaningful progress toward a definitive deal framework.

In parallel, and as a critical component of our overall strategy, we have developed a comprehensive Chapter 11 contingency plan for TAI (the "Playbook"), which contemplates a voluntary petition in the United States Bankruptcy Court for the Southern District of Texas (Houston Division). The Playbook was substantially completed on January 10, 2023, and includes a committed DIP financing term sheet from Nordbank International AG and Triton Credit Partners LP for $75 million, a CRO engagement on standby with Alderney Management Advisors LLC, and retention of Pendleton Claim Services Inc. as claims and noticing agent. The Playbook provides critical leverage in negotiations with all creditor constituencies. However, the out-of-court path remains strongly preferred, given the estimated Chapter 11 administrative costs of $18.5 million for the first twelve months alone, as well as the significant reputational harm, customer defection risk, potential for vessel arrests in foreign jurisdictions, and operational disruption to TSL's global fleet operations that would inevitably accompany a bankruptcy filing.

Based on our analysis, we recommend pursuing an RSA that achieves the following core objectives:

(a) provides meaningful relief to TSL on its senior secured debt service obligations through a maturity extension, covenant reset, and partial PIK conversion;

(b) offers Dralvecen Mezzanine Capital LLC ("BMC"), the holder of TSL's $112.3 million mezzanine notes, a blended recovery that exceeds its Chapter 11 alternative through a combination of new second-lien notes and equity in TSL;

(c) leaves the unsecured notes ($50 million, 8.25% cash pay) and trade creditors ($38.7 million) entirely unimpaired, minimizing negotiation complexity and preserving essential commercial relationships; and

(d) is supported by a new equity contribution of approximately €35 million (approximately $38.2 million at current exchange rates) from the Kostandinos family through KFO Holdings SA, demonstrating the family's commitment to the restructured enterprise and providing necessary liquidity to fund the transition.

The remainder of this memorandum sets forth the detailed capital structure overview, stakeholder-by-stakeholder negotiating analysis, Chapter 11 contingency plan considerations, proposed RSA framework, negotiation timeline, key risk factors, and recommended immediate client actions.

II. Capital Structure Overview and Recovery Analysis

This section provides a detailed overview of each layer of the TSL capital structure as of September 30, 2022, including the identity of holders, key terms, outstanding amounts, collateral, covenant status, and our analysis of estimated recoveries under both the proposed out-of-court RSA and a Chapter 11 liquidation or reorganization scenario. The recovery analysis is based on the KHP enterprise valuation range of $580 million to $640 million (midpoint $610 million) and the Drakos Maritime Valuations fleet appraisal of $623 million, each as described in greater detail below.

A. Senior Secured Credit Facility

The senior secured credit facility was originally entered into on June 15, 2019, with TSL as borrower and TAI as co-borrower on the U.S. Tranche. Nordbank International AG serves as both administrative agent and collateral agent under the facility.

The facility was originally committed at an aggregate amount of $685 million, structured in three tranches:

Term Loan A ("TLA"): Original principal of $400 million, amortizing at $10 million per quarter. Through the period from the third quarter of 2019 through the third quarter of 2022, thirteen quarterly amortization payments have been made, resulting in aggregate amortization of $130 million. The outstanding principal balance of the TLA as of September 30, 2022 is therefore $270 million.

Revolving Credit Facility ("Revolver"): Total commitment of $200 million. As of September 30, 2022, $185 million has been drawn, with $15 million of undrawn availability remaining. The Revolver has been substantially utilized to fund working capital needs during the downturn, and we note that the remaining undrawn capacity provides only minimal liquidity cushion.

U.S. Tranche (Term Loan B, or "TLB"): Principal of $85 million, structured as a non-amortizing bullet maturity. TAI is the co-borrower on this tranche, which is the principal basis for TAI's obligations under the credit facility and the jurisdictional nexus for the Chapter 11 contingency plan.

Total Outstanding: The aggregate outstanding balance under the senior secured credit facility is $540 million ($270 million TLA + $185 million Revolver + $85 million TLB).

The applicable interest rate is the Secured Overnight Financing Rate ("SOFR") plus 375 basis points, with a default rate of an additional 200 basis points applicable upon the occurrence and continuance of an event of default. The maturity date for all tranches is June 15, 2024, which is approximately seventeen months from the date of this memorandum and represents the most acute near-term pressure point in TSL's capital structure.

The facility is secured by first-priority liens on substantially all of TSL's and TAI's assets, including: thirty-eight (38) dry-bulk carriers; twelve (12) container vessels; the Houston terminal lease (held by TAI); all accounts receivable of TSL and TAI; and the equity interests in TAI and fourteen (14) vessel-owning special purpose vehicles ("SPVs"). This comprehensive collateral package provides the senior secured lenders with a substantial asset base, although the declining trajectory of fleet values introduces meaningful uncertainty as to the adequacy of collateral coverage on a going-forward basis.

Covenant Breaches. As of the most recent testing dates, TSL is in breach of three financial covenants under the credit agreement:

Minimum Liquidity: Actual liquidity of $27.3 million as of September 15, 2022, versus a required minimum of $40 million, representing a shortfall of $12.7 million.

Maximum Net Leverage Ratio: As of September 30, 2022, TSL's Net Leverage Ratio stood at 7.82x, calculated as Net Debt of $770.9 million divided by LTM EBITDA of $98.6 million. The covenant maximum is 5.50x. The breach is substantial, reflecting both the growth of net debt and the compression of EBITDA due to falling charter rates.

Minimum Interest Coverage Ratio: As of September 30, 2022, TSL's Interest Coverage Ratio stood at 1.74x, calculated as LTM EBITDA of $98.6 million divided by LTM Interest Expense of $56.7 million. The covenant minimum is 2.50x.

Each of these breaches constitutes an event of default under the credit agreement. The forbearance agreement executed on October 10, 2022, and subsequently extended to March 8, 2023, provides a temporary waiver of the lenders' remedies arising from these defaults, but the underlying defaults remain outstanding and must be addressed through either a covenant reset in the proposed amendment or a permanent waiver.

Recovery Analysis. At the fleet appraised value of $623 million (Drakos Maritime Valuations, November 1, 2022), the senior secured lenders are likely covered in full or near-full on their $540 million outstanding principal. At KHP's midpoint enterprise value of $610 million, the senior secured recovery is $540 million out of $540 million, or 100%. Even at KHP's low-end enterprise value of $580 million, the senior secured lenders would recover $540 million out of $540 million, or 100%, as the enterprise value exceeds the senior secured claim. This full-coverage position is an important factor in the negotiating dynamic: the senior secured lenders are not facing a principal write-down under any reasonable scenario, which should moderate their negotiating posture and orient them toward maturity extension and covenant relief rather than aggressive enforcement.

The TLA CUSIP is 87265BAA7.

B. Mezzanine Notes

The mezzanine notes are held in their entirety by Dralvecen Mezzanine Capital LLC ("BMC"), a New York-based private credit fund with offices at 600 Lexington Avenue, 22nd Floor, New York, NY 10022. The key contact at BMC is Rebecca Quimby, Senior Partner, who has been the primary decision-maker with respect to BMC's position in the TSL capital structure throughout the restructuring process.

BMC is represented by Kellner & Foss LLP, with Theodore Kellner serving as lead partner and Samantha Ong as the senior associate. K&F's offices are located at 1185 Avenue of the Americas, 30th Floor, New York, NY 10036. Mr. Kellner is an experienced restructuring practitioner with a reputation for pragmatic, deal-oriented negotiation, which we view as a favorable factor in our assessment of the likely negotiation dynamic with BMC.

The mezzanine notes were originally issued in the principal amount of $100 million. The notes bear interest at a rate of 11.5% on a PIK toggle basis, and BMC has elected PIK treatment on all interest payments since the second quarter of 2022. Through September 30, 2022, $12.3 million in PIK interest has been capitalized, bringing the total outstanding principal balance to $112.3 million. The maturity date is December 15, 2024.

The mezzanine notes are secured by second-priority liens on the same collateral that secures the senior secured credit facility, pursuant to an Intercreditor Agreement dated June 15, 2019, between Nordbank International AG (as first-lien agent) and BMC (as second-lien holder). The Intercreditor Agreement contains customary subordination provisions, including a standstill on second-lien enforcement for 180 days following notification of default, purchase option rights, and limitations on BMC's ability to challenge first-lien actions.

Recovery Analysis. The mezzanine notes represent the fulcrum security in TSL's capital structure — meaning that the mezzanine is the class of debt where the enterprise value "breaks" and recoveries begin to decline below par. Our recovery analysis, based on the KHP enterprise valuation, is as follows:

Midpoint Enterprise Value ($610 million): Recovery = ($610M – $540M senior secured) / $112.3M = $70 million / $112.3 million = 62.3%.

Low-End Enterprise Value ($580 million): Recovery = ($580M – $540M senior secured) / $112.3M = $40 million / $112.3 million = 35.6%.

High-End Enterprise Value ($640 million): Recovery = ($640M – $540M senior secured) / $112.3M = $100 million / $112.3 million = 89.0%.

These recovery estimates illustrate the wide range of outcomes available to BMC and underscore why the mezzanine notes are the critical negotiating fulcrum. BMC's leverage in negotiations is relatively limited given its subordinated position and the constraints of the Intercreditor Agreement, but BMC retains the ability to delay or complicate a consensual deal. In a Chapter 11 proceeding, BMC would constitute an impaired class whose vote would be required for plan confirmation absent a cramdown under 11 U.S.C. § 1129(b). Given the complexity and cost of a cramdown proceeding, obtaining BMC's consent to the RSA is strongly preferred.

C. Unsecured Notes

TSL has outstanding $50 million in aggregate principal amount of unsecured notes, bearing interest at 8.25% per annum, payable semi-annually in cash on June 1 and December 1 of each year. The notes mature on March 1, 2025. The indenture trustee is Garrison Trust Company, located at 100 Wall Street, 16th Floor, New York, NY 10005. The CUSIP for the unsecured notes is 87265BAB5.

On December 1, 2022, TSL failed to make the scheduled semi-annual interest payment of $2,062,500 (calculated as $50 million × 8.25% ÷ 2). The indenture provides for a 30-day cure period following a missed payment, which expired on January 1, 2023 without the payment having been made. This failure constitutes an event of default under the indenture, and the unsecured noteholders (or Garrison Trust Company, acting on their behalf) now have the right to accelerate the outstanding principal and accrued interest.

An informal group of unsecured noteholders has retained Ashford, Brightmoor Group & McKay PC as counsel, with Carolyn Brightmoor Group serving as lead partner and Robert Mancini as the senior associate on the matter. ADM's offices are located at 299 Park Avenue, 18th Floor, New York, NY 10171. We have had preliminary contact with Ms. Brightmoor Group, who has indicated her clients' strong preference for a consensual resolution that addresses the missed payment.

Recovery Analysis. In a Chapter 11 proceeding, the unsecured noteholders would be classified as general unsecured creditors. Based on KHP's waterfall analysis, the estimated recovery for general unsecured creditors is 8 to 14 cents on the dollar. This devastating outcome is a direct function of the significant senior secured and mezzanine claims that stand ahead of the unsecured notes in the priority waterfall. Accordingly, the unsecured noteholders have an overwhelming incentive to support any out-of-court resolution that pays them in full or near-full.

We note that the event of default under the unsecured notes indenture presents a cross-default risk that could propagate through the capital structure, potentially triggering acceleration provisions in the mezzanine notes and further complicating the negotiating environment. Prompt resolution of this default — through payment of the missed coupon at or before RSA closing — is therefore an important element of our proposed strategy.

D. Trade Creditors

As of September 30, 2022, TSL had approximately $38.7 million in outstanding trade payables. The largest single trade creditor is Olympian Fuel & Supply SA, a bunker fuel supplier headquartered in Piraeus, Greece, which is owed approximately $9.2 million. Other significant trade creditors include port service providers, ship maintenance and drydocking contractors, classification society fees, insurance premiums, and various operational supply vendors.

In a Chapter 11 proceeding, trade creditors would be classified as general unsecured creditors and would share in the same 8 to 14 cents on the dollar recovery estimated for the unsecured noteholders, absent a critical vendor designation obtained through a first-day motion. Even with critical vendor treatment, the process would create significant uncertainty for suppliers and could result in the loss of essential vendor relationships — particularly the bunker fuel supply relationship with Olympian, which is critical to fleet operations.

Strategy. We propose to pay all trade creditors in full in the ordinary course, without any impairment or modification of their existing terms. The impairment of trade creditors is unnecessary to achieve the financial objectives of the restructuring, and any attempt to reduce or defer trade payables would jeopardize TSL's ongoing fleet operations, damage critical commercial relationships, and introduce needless complexity into the RSA negotiation process.

E. Intercompany Note

TAI owes TSL $76.4 million under a subordinated intercompany note, bearing interest at 5.0% per annum. This intercompany obligation reflects historical capital flows from the Greek parent to the U.S. subsidiary and raises a number of issues in the restructuring context.

Most significantly, if TAI were to file Chapter 11, the intercompany note would present substantive consolidation risk. TSL, as the holder of the note, would be a creditor of the TAI estate, and other creditors could seek to consolidate the TSL and TAI estates on the basis that the entities were operated as a single economic unit, that intercompany transactions lacked arm's-length terms, or that the entities had commingled assets. We analyzed these issues in detail in our memorandum dated December 5, 2022, and concluded that while the substantive consolidation risk is manageable, it is a meaningful litigation exposure that weighs in favor of the out-of-court path.

Strategy. As part of the RSA, we propose to restructure the intercompany note by extending its maturity to December 2028, reducing the interest rate from 5.0% to 2.0%, and confirming the note's subordination to all senior secured and second-lien indebtedness. These modifications will improve TAI's cash flow profile, reduce the intercompany friction that has contributed to the U.S. subsidiary's liquidity challenges, and help mitigate any preference or fraudulent transfer risk associated with historical interest payments on the note.

F. Equity. KFO Holdings SA, the Kostandinos family holding company, holds 80% of TSL's equity. The family's holdings are divided between Dimitrios Kostandinos, who holds 62%, and Elena Kostandinos-Pavlou, who holds 18%. The remaining 20% is held by non-family investors.

In a Chapter 11 scenario, existing equity would likely be significantly diluted or eliminated entirely. Under the absolute priority rule, equity holders are not entitled to receive any distribution until all senior classes of claims have been paid in full. Given the substantial shortfall between TSL's enterprise value ($580 million to $640 million) and its total debt obligations, equity has no residual value on a strict balance-sheet basis. TSL's total indebtedness — excluding trade payables — consists of $540 million senior secured, $112.3 million mezzanine, $50 million unsecured notes, and $76.4 million intercompany, totaling $778.7 million, which exceeds even KHP's high-end enterprise value estimate of $640 million by $138.7 million.

However, the out-of-court context permits a different calculus. The going-concern value of the TSL platform — including its fleet management infrastructure, long-standing charter relationships, operational expertise, and the Kostandinos family's deep industry relationships — supports preserving the family's equity position. Moreover, the family's willingness to contribute new capital (€35 million) provides a basis for creditors to accept the family's continued majority ownership as part of the negotiated exchange. In the out-of-court deal, the family can retain a majority position while contributing meaningful new capital, a result that would be difficult or impossible to achieve in a Chapter 11 proceeding where the absolute priority rule would likely mandate full equitization.

III. Stakeholder-by-Stakeholder Negotiating Analysis

This section provides a detailed analysis of each creditor constituency's composition, motivations, likely demands, and our recommended negotiating approach. The analysis is intended to guide our engagement strategy and to anticipate the key points of contention that will arise during the RSA negotiation process.

A. The Ad Hoc Group of Senior Secured Lenders

1. Composition and Voting Power. The Ad Hoc Group of Senior Secured Lenders was formed in August 2022 in response to TSL's deteriorating financial performance and the emerging covenant breaches. The group comprises four institutional lenders:

The Ad Hoc Group is represented by Whitfield, Crane & Burgess LLP ("WCB"), with Graham Whitfield III serving as lead partner and Priya Nandakumar as the senior associate. WCB's offices are located at 51 West 52nd Street, 38th Floor, New York, NY 10019. The group's financial advisor is Draycott Advisory Group LLC ("Draycott"), with Vanessa Chow, Partner, serving as lead advisor. Draycott's offices are at 520 Madison Avenue, 20th Floor, New York, NY 10022.

With combined holdings of $372 million, the Ad Hoc Group controls 54.3% of the total facility commitment and approximately 68.9% of the outstanding balance of $540 million. This concentration of holdings gives the group de facto control over the direction of the senior secured lending group, though — as discussed in Section III.B below — the non-Ad-Hoc lenders hold a material minority position and cannot be ignored.

2. Key Interests and Motivations. The senior secured lenders' primary concern is the protection of their collateral value. At the current fleet appraised value of $623 million, the senior secured lenders enjoy comfortable coverage on their $540 million outstanding principal, with a loan-to-value ratio of approximately 86.7%. However, the trajectory of fleet values is concerning: the Drakos appraisal in January 2022 valued the fleet at $891 million, meaning that approximately $268 million in collateral value has evaporated in less than ten months. If dry-bulk charter rates continue to decline, further erosion of fleet values could bring the loan-to-value ratio uncomfortably close to — or even above — 100%, at which point the senior secured lenders' incentives shift dramatically toward enforcement.

At the same time, the senior secured lenders recognize that enforcement against a 50-vessel international fleet is a complex, time-consuming, and value-destructive undertaking. Foreclosure would require coordination across multiple jurisdictions, including Greece, the United States, Singapore, and various flag states. Fire-sale values for shipping assets in the current depressed market would almost certainly be well below the Drakos appraised value, potentially resulting in a meaningful principal shortfall for the senior secured lenders. The administrative and legal costs of a foreclosure proceeding would be substantial, and the process could take 12 to 24 months to complete.

Nordbank International AG occupies a particularly significant position as both the administrative and collateral agent under the credit facility and the single largest lender at $137 million. Nordbank has a strong institutional interest in avoiding a disorderly default that could trigger cross-defaults across Nordbank's broader shipping portfolio. Nordbank is also a major participant in the European shipping finance market, and a public default and enforcement action against a major Greek shipping group would have reputational implications for Nordbank within the industry.

Triton Credit Partners LP ($68 million) presents a more nuanced negotiating profile. Triton is one of the two proposed DIP lenders (along with Nordbank) under the Chapter 11 contingency plan, with a committed DIP facility of $75 million at SOFR + 600 basis points and a 0.50% commitment fee. The DIP facility would provide Triton with superpriority administrative expense claims, attractive economics, and enhanced leverage in any Chapter 11 case. This creates a mixed-incentive dynamic: while Triton may prefer the out-of-court path on balance, the availability of the DIP opportunity means that Triton's aversion to a Chapter 11 filing may be less intense than that of the other Ad Hoc Group members. We should be mindful of this dynamic in our negotiations with WCB and Draycott.

The Ad Hoc Group has been broadly cooperative during the forbearance period, extending the standstill once without significant resistance. However, the group expects meaningful concessions from equity and junior creditors as a condition of further forbearance and any permanent restructuring. The group's position — communicated informally through WCB — is that the restructuring must demonstrate (a) tangible equity contributions from the Kostandinos family, (b) a real deleveraging plan, and (c) a covenant framework that provides the lenders with meaningful protections going forward. These expectations are reasonable and should be addressed directly in our RSA proposal.

3. Likely Demands. Based on our analysis of the senior secured lenders' position, our discussions with WCB and Draycott during the forbearance period, and market precedent for similar shipping restructurings, we anticipate the Ad Hoc Group will make the following principal demands:

Maturity Extension: The near-term maturity of June 15, 2024 is the single most critical problem in the capital structure. The Ad Hoc Group will require a meaningful extension — likely three to four years — to provide sufficient runway for TSL to execute its operational turnaround plan and for the shipping market cycle to recover.

Deleveraging: The Ad Hoc Group will insist on a concrete deleveraging program, including both asset sales and new equity contributions from the Kostandinos family. The group will want to see TSL's leverage ratio on a clear downward trajectory, supported by binding milestones.

Financial Covenant Reset: The existing covenants are plainly unachievable at current market conditions. The Ad Hoc Group will agree to a reset, but will insist on covenants that are realistic but not so loose as to be meaningless. Expect significant negotiation on the step-down schedule for the leverage ratio and the terms of any interest coverage waiver.

Amendment Fee: Market standard for a shipping credit facility amendment of this nature is 0.50% to 1.50% of outstanding principal. The Ad Hoc Group will likely open at 1.50% ($8.1 million) and may accept 1.00% ($5.4 million) as a reasonable compromise.

Waiver of Past Defaults: The group will agree to a retroactive waiver of the existing covenant defaults and default interest, but only as part of a comprehensive amendment package. The waiver will be conditioned on the effectiveness of all other RSA terms.

Reduction in Revolver Commitment: The group will likely seek to reduce its revolver exposure, particularly given that $185 million of the $200 million commitment has been drawn. A reduction from $200 million to $150 million — partially offset by the existing $15 million of undrawn capacity — is a reasonable outcome.

Mandatory Prepayment: The group will require that net cash proceeds from any vessel dispositions be applied to prepay the TLA on a mandatory basis, with no reinvestment exception or, at most, a narrowly tailored reinvestment right.

PIK Conversion: The Ad Hoc Group may agree to the conversion of a portion of TLA principal to PIK interest to reduce near-term cash debt service, provided that the PIK component does not materially increase the total principal exposure over the life of the amended facility. This is an area of alignment between TSL and the senior secured lenders, as reduced cash debt service benefits both parties.

4. Negotiating Approach. Our recommended approach to the Ad Hoc Group is to engage Graham Whitfield III and Vanessa Chow early and frequently, proposing a framework that directly addresses their core concerns — maturity extension, deleveraging, and covenant reset — while preserving TSL's operational flexibility and the Kostandinos family's majority equity position.

The key elements of our engagement strategy are as follows:

First, we should emphasize forcefully that the Chapter 11 alternative would impose significant costs on the senior secured lenders. Even though the lenders are nominally fully covered at current valuations, a Chapter 11 filing would introduce: (i) $18.5 million in estimated administrative expenses that would be paid ahead of their secured claims; (ii) a $75 million DIP facility with superpriority claims that would prime their existing first-lien position; (iii) potential challenges to their liens, including avoidance actions and equitable subordination claims; (iv) delays of nine to twelve months or more, during which fleet values could continue to decline; and (v) reputational harm to TSL that would damage charter relationships and reduce the going-concern value of the enterprise, directly impairing the lenders' collateral.

Second, we should use the DIP term sheet from Nordbank and Triton as a bridge in the negotiations. The DIP terms — SOFR + 600 basis points, 0.50% commitment fee, 12-month maturity — demonstrate that even the proposed DIP lenders recognize that capital deployed to TSL in the current environment commands a significant premium. An amendment to the existing facility that provides broadly similar economics (including the amendment fee and reset coupon) would be economically preferable for the lenders compared to a DIP facility, because it avoids the administrative costs, complexity, and uncertainty of a Chapter 11 proceeding.

Third, we propose an amendment fee of 1.00% of outstanding principal ($540 million × 1.00% = $5.4 million), payable in kind, as a reasonable compromise. We anticipate that WCB will open at 1.50% ($8.1 million) and that we can negotiate to the 1.00% level, which is within the market range for comparable transactions.

Fourth, we should present the KFO equity contribution of €35 million (approximately $38.2 million) prominently in our discussions with the Ad Hoc Group. The equity contribution demonstrates the Kostandinos family's commitment to the restructured enterprise and provides tangible new value that enhances the senior secured lenders' recovery prospects. The senior secured lenders will want to know that the family has "skin in the game," and the equity contribution addresses this concern directly.

B. Non-Ad-Hoc-Group Senior Secured Lenders

1. Composition. The remaining five senior secured lenders, who are not members of the Ad Hoc Group, hold an aggregate of $313 million, representing 45.7% of the total facility commitment:

2. Key Considerations. These lenders are not represented by WCB or advised by Draycott, and each will need to be individually engaged and brought into the transaction. This presents both a logistical challenge and a potential holdout risk, but several factors work in our favor.

Most significantly, the Ad Hoc Group's majority position ($372 million / 68.9% of outstanding) means that the non-Ad-Hoc lenders are likely to follow the Ad Hoc Group's lead on amendment terms. This dynamic is typical in syndicated lending: once a majority lending group has agreed to a term sheet, minority lenders face strong pressure to participate, as the alternative — holding out against a majority-supported deal — is strategically unfavorable and often counterproductive.

Aegean Capital Bank SA ($110 million) deserves particular attention. As the second-largest individual lender behind Nordbank, Aegean holds a meaningful position that could be influential in building consensus. Aegean is a Greek institution, and its principal contact, Nikolaos Ventouris, has longstanding commercial relationships within the Greek shipping community. There is a potential for significant alignment between Aegean and TSL based on shared Greek commercial interests, cultural affinity, and Aegean's desire to maintain its relationship with the Kostandinos family and the broader Greek shipping industry. We recommend that Georgios Andreadis engage Mr. Ventouris directly and early in the process, leveraging the relationship to secure Aegean's support for the amendment framework.

The smaller holders — Caspian Asset Management Ltd. ($40 million) and Pelagos Institutional Credit Fund ($26 million) — may have less appetite for extended negotiations and may prefer a quick resolution. These institutions are likely to be followers rather than leaders in the negotiation, and their consent can be expected once the broader terms are agreed.

A critical procedural question concerns the requisite lender threshold for the proposed amendment. Under most syndicated credit agreements, routine amendments require the consent of lenders holding a majority (typically 50.1%) or two-thirds (66⅔%) of the outstanding commitments. However, certain "sacred rights" — including extensions of maturity and reductions in interest rate — typically require the unanimous consent of all affected lenders. We need to review the specific provisions of the credit agreement to confirm the applicable threshold. If unanimity is required for the maturity extension (as we suspect), all nine lenders must agree, making holdout risk a serious concern. We will address this risk through the strategy described below.

Strategy. Our approach is to secure agreement from the Ad Hoc Group first, arriving at a substantially agreed term sheet with WCB and Draycott, and then to approach the non-Ad-Hoc lenders with a package that is presented as a done deal subject only to their consent. This approach minimizes the opportunity for individual lender holdouts and creates momentum toward closing. We should be prepared, however, for the possibility that one or more non-Ad-Hoc lenders may seek side concessions or supplemental arrangements as a condition of their consent, and we should have contingency plans for addressing such requests.

C. Dralvecen Mezzanine Capital LLC (BMC)

1. Position. BMC's $112.3 million mezzanine position ($100 million original principal plus $12.3 million in capitalized PIK interest through September 30, 2022) is the fulcrum security in TSL's capital structure. As the second-lien holder, BMC sits between the fully-covered senior secured lenders and the deeply out-of-the-money unsecured noteholders. The outcome for BMC depends critically on the enterprise value that is ultimately realized, and as such, BMC has the most at stake in the negotiation — and the most to gain or lose from the structure of the RSA.

BMC is represented by Kellner & Foss LLP, with Theodore Kellner as lead partner and Samantha Ong as senior associate. Mr. Kellner is an experienced restructuring attorney who has been involved in numerous shipping and transportation restructurings. He is known for a pragmatic, deal-oriented approach, though he is also a vigorous advocate for his clients' interests and should not be underestimated.

Rebecca Quimby, BMC's Senior Partner and the key decision-maker, is a sophisticated investor with deep experience in distressed debt and mezzanine lending. Ms. Quimby has participated in numerous shipping restructurings and understands the cyclical dynamics of the market. This sophistication cuts both ways: while it means that Ms. Quimby is likely to be realistic about BMC's recovery prospects and open to a structured negotiation, it also means that she will be well-equipped to identify and exploit any weaknesses in our proposal.

2. Key Interests and Motivations. As the fulcrum security holder, BMC's primary interest is in maximizing its recovery, which at the KHP midpoint enterprise value of $610 million stands at approximately 62.3% of its $112.3 million claim in a Chapter 11 proceeding. However, this headline recovery figure understates the risks that BMC faces in a bankruptcy scenario, including administrative cost priming, DIP facility superpriority, delays, and value erosion, all of which would reduce BMC's actual recovery below the theoretical 62.3%.

BMC has a strong incentive to participate in any restructuring that provides a recovery better than its Chapter 11 alternative — and the out-of-court path can achieve this by avoiding the administrative costs and value destruction inherent in a bankruptcy proceeding. However, BMC also has a natural inclination to resist any deal that crystallizes a loss at current depressed valuations. Rebecca Quimby is likely to argue — correctly — that the shipping market is cyclical and that current valuations reflect a trough in the cycle. BMC may therefore resist a deep haircut on the face value of its claim, preferring instead to preserve upside exposure through equity participation or other mechanisms that allow it to benefit from a recovery in charter rates.

We expect BMC to seek equity conversion as a central element of any restructuring exchange. An equity stake in the restructured TSL would allow BMC to participate in the upside if charter rates recover, effectively providing an option on future value creation that would not be available in a Chapter 11 proceeding. BMC will also likely seek governance rights — such as board observation rights or board seats — commensurate with its expected equity position.

Additionally, BMC's PIK interest continues to accrue at 11.5%, growing the principal balance of the mezzanine notes with every passing quarter. This accretion works in BMC's favor in the short term but also creates pressure to reach a resolution: if the restructuring is delayed, the growing mezzanine claim further compresses the value available for other constituencies and increases the complexity of the deal.

3. Likely Demands. Based on our analysis, we anticipate that BMC will advance the following principal demands in the RSA negotiations:

Equity Stake: BMC will demand a meaningful equity stake in TSL as part of the exchange, to participate in any upside recovery if charter rates improve. We expect BMC to open at 20–25% equity and to settle in the range of 12–18%.

New Secured Notes: BMC will seek new second-lien notes with a face value as close to par as possible, a reasonable coupon, and a maturity that provides BMC with a defined path to repayment. BMC is likely to resist any face-value reduction greater than 40–50%.

Cyclical Valuation Argument: BMC will argue strenuously that current valuations are temporarily depressed and do not reflect the long-term value of the TSL fleet and business platform. This argument has merit — the shipping cycle will eventually turn — and we should be prepared to engage with it rather than dismiss it. The equity component of our proposal directly addresses this concern by giving BMC exposure to future value recovery.

Board Observation / Governance Rights: As a significant equity holder, BMC will seek governance protections, including board representation or observation rights, information rights, and anti-dilution protections. These demands are reasonable and should be conceded within appropriate limits.

Anti-Dilution Protections: BMC will want protections against future dilution of its equity stake, including preemptive rights on future equity issuances and customary anti-dilution adjustments for stock splits, dividends, and similar corporate events.

4. Negotiating Approach. Our recommended approach to BMC is to propose an exchange of the $112.3 million mezzanine notes for a combination of new second-lien notes with a substantially reduced face value and equity in TSL. Specifically, we propose:

New Second-Lien Notes: $60 million in new second-lien notes, bearing interest at 10.0% PIK, with a maturity of June 2028. The new notes would be secured by second-priority liens on the same collateral as the existing mezzanine notes, subject to an Amended and Restated Intercreditor Agreement between Nordbank and BMC.

Equity: 15% equity in TSL, calculated on a fully-diluted basis after giving effect to the equity allocation.

This proposal represents a 46.6% haircut on the debt component (($112.3 million – $60 million) / $112.3 million = 46.6%), which is at the aggressive end of what we believe BMC will accept. However, the equity component provides meaningful upside that compensates for the debt haircut. The combined package gives BMC a blended recovery that exceeds its Chapter 11 recovery: $60 million in new notes (with PIK accretion and second-lien security) plus equity with meaningful upside potential, compared to approximately $70 million in Chapter 11 at the midpoint enterprise value with no equity participation and nine to twelve months of delay and uncertainty.

When presenting this proposal to Theodore Kellner and Rebecca Quimby, we should frame the Chapter 11 alternative clearly and specifically:

In a Chapter 11 proceeding, BMC would face: (i) $18.5 million in estimated administrative expenses that would be paid ahead of BMC's second-lien claims; (ii) a $75 million DIP facility from Nordbank and Triton with superpriority claims that would further prime BMC's position; (iii) a timeline of nine to twelve months from petition to effective date, during which fleet values could continue to decline; (iv) the uncertainty of a contested plan process, with no guarantee that BMC would receive better treatment than the Chapter 11 waterfall analysis suggests; and (v) no equity participation in the reorganized entity, meaning BMC would receive only the cash or debt distributable under the plan, with no option on future upside.

The 15% equity dilution to BMC would reduce the Kostandinos family's combined stake from 80% to approximately 68% (80% × 85% = 68%), and the non-family equity from 20% to approximately 17% (20% × 85% = 17%). This dilution must be presented to and approved by the Kostandinos family before it is tabled in negotiations with BMC. Specifically:

Dimitrios Kostandinos's personal stake would be diluted from 62% to approximately 52.7% (62% × 85% = 52.7%).

Elena Kostandinos-Pavlou's stake would be diluted from 18% to approximately 15.3% (18% × 85% = 15.3%).

The family would retain a combined 68% stake, preserving majority control and all associated governance rights.

We recommend engaging Theodore Kellner at K&F early with this framework. As noted above, Mr. Kellner is a pragmatic practitioner who will appreciate a structured, well-supported proposal backed by KHP's valuation analysis. An early presentation of a comprehensive package — rather than a series of incremental proposals — will establish credibility and accelerate the negotiation process. We should also arrange for James Calloway of KHP to participate in a presentation to BMC's advisory team, walking through the valuation methodology and waterfall analysis in detail.

D. Unsecured Noteholders

1. Position. The unsecured noteholders hold $50 million in aggregate principal amount of 8.25% cash-pay notes due March 1, 2025. The notes are currently in default following the failure to pay the December 1, 2022 semi-annual coupon of $2,062,500, with the 30-day cure period having expired on January 1, 2023.

An informal group of unsecured noteholders has formed and retained Ashford, Brightmoor Group & McKay PC ("ADM") as counsel, with Carolyn Brightmoor Group as lead partner and Robert Mancini as senior associate.

2. Key Interests and Motivations. The unsecured noteholders occupy a uniquely vulnerable position in the TSL capital structure. In a Chapter 11 proceeding, their recovery would be catastrophic: 8 to 14 cents on the dollar based on KHP's waterfall analysis. This outcome reflects the enormous weight of secured and mezzanine claims that stand ahead of the unsecured notes in the priority waterfall. There is simply insufficient value in the enterprise to provide a meaningful distribution to general unsecured creditors after the senior secured facility ($540 million) and mezzanine notes ($112.3 million) have been satisfied.

Accordingly, the unsecured noteholders have an overwhelming incentive to cooperate with any deal that pays them in full or near-full. The difference between 100 cents recovery under an unimpaired treatment and 8-14 cents in a Chapter 11 is dramatic, and this disparity gives us significant leverage in our dealings with the unsecured noteholder group. The noteholders' primary concerns are straightforward: receiving the missed December 2022 coupon, obtaining assurance of future payments through the March 2025 maturity, and avoiding the catastrophic outcomes associated with a bankruptcy filing.

At the same time, the event of default under the unsecured notes indenture provides the noteholders with modest leverage that they would not otherwise possess. The cross-default provisions in other TSL debt instruments mean that the unsecured note default has the potential to cascade through the capital structure, triggering additional defaults and further complicating the negotiating environment. This cross-default risk provides Carolyn Brightmoor Group with a bargaining chip — albeit a modest one — in negotiations.

3. Negotiating Approach. We propose to leave the unsecured notes entirely unimpaired under the RSA. Specifically, we would:

(a) Pay the missed December 1, 2022 coupon of $2,062,500 in full at or promptly following RSA closing;

(b) Maintain the unsecured notes on their existing terms (8.25% cash pay, semi-annual, maturing March 1, 2025) without any modification to principal, interest rate, maturity, or other terms; and

(c) Obtain a consent and waiver from Garrison Trust Company (as indenture trustee), acting on behalf of the unsecured noteholders through ADM, waiving the existing event of default under the indenture, conditioned upon payment of the missed coupon at closing.

This approach offers several significant advantages. First, it minimizes negotiation complexity by eliminating the need for an indenture amendment or consent solicitation process, which would require majority holder consent, involve Garrison Trust Company, and add weeks or months to the transaction timeline. Second, it avoids the risk of noteholder opposition and potential litigation over the terms of any impairment. Third, it preserves the goodwill of the unsecured noteholder community, which is beneficial for TSL's credit market reputation. Fourth, the cost of unimpaired treatment is modest: the missed coupon payment of $2,062,500 is a small price to pay for the elimination of a potentially disruptive creditor constituency from the RSA negotiations.

Carolyn Brightmoor Group and the unsecured noteholder group should be highly receptive to this treatment. We recommend communicating the proposed unimpaired treatment to ADM early in the process, which will remove the unsecured noteholders as a source of friction and allow us to focus our negotiating resources on the more complex discussions with WCB (senior secured) and K&F (mezzanine).

E. Trade Creditors

1. Position. TSL has approximately $38.7 million in outstanding trade payables as of September 30, 2022. The largest single trade creditor is Olympian Fuel & Supply SA, a bunker fuel supplier headquartered in Piraeus, which is owed approximately $9.2 million. Other significant trade creditors include port services providers, ship repair and maintenance contractors, classification societies, marine insurers, and various operational supply vendors. These relationships are essential to TSL's day-to-day fleet operations. Bunker fuel is the single largest operating expense for any shipping company, and a disruption in the fuel supply chain would have immediate and severe operational consequences, potentially grounding vessels and breaching charter party obligations.

2. Negotiating Approach. We propose to pay all trade creditors in full in the ordinary course, without any impairment, deferral, or modification of existing payment terms. Trade creditors are not parties to the RSA negotiations, and the treatment of trade claims should be confirmed in the RSA term sheet but requires no separate negotiation or documentation.

This approach is consistent with both operational necessity and restructuring best practices. In a Chapter 11 proceeding, TSL would need to file critical vendor motions for key suppliers including Olympian Fuel & Supply — motions that are routinely contested by creditors' committees and are subject to judicial discretion. The out-of-court RSA path eliminates this risk entirely and preserves TSL's trade relationships on their existing terms, which is essential for the continued operation of the fleet during and after the restructuring process.

F. KFO Holdings SA / Kostandinos Family

1. Position. KFO Holdings SA is the Kostandinos family holding company, headquartered at 42 Akti Miaouli, Piraeus, Greece — the same building as TSL's principal offices. KFO holds 80% of TSL's equity, divided between Dimitrios Kostandinos (62%) and Elena Kostandinos-Pavlou (18%). The remaining 20% is held by non-family investors.

In a Chapter 11 scenario, the Kostandinos family's equity position would likely be significantly diluted or eliminated entirely. Under the absolute priority rule, equity holders cannot receive any distribution until all senior classes of claims have been paid in full. Given the magnitude of TSL's funded debt ($778.7 million excluding trade) relative to its enterprise value ($580 million to $640 million), there is no realistic scenario under which existing equity would receive a meaningful distribution in a Chapter 11 proceeding.

Beyond the financial exposure, the Kostandinos family has a deep reputational and legacy interest in maintaining control of the Thalassa business. TSL was founded in 1987 by the Kostandinos family and has grown over 35 years into a significant global shipping platform. The family's identity, reputation, and standing within the Greek shipping community are inextricably linked to the Thalassa name. The loss of control — or the public humiliation of a bankruptcy filing — would be deeply damaging to the family on a personal and reputational level, beyond the financial consequences.

2. Expected Contribution and Concessions. The Kostandinos family's participation in the RSA is a critical prerequisite for creditor buy-in. The Ad Hoc Group of Senior Secured Lenders has made clear, through informal communications via WCB, that any restructuring must include a meaningful equity contribution from the family. This expectation is reasonable and consistent with market practice: in virtually every out-of-court shipping restructuring, the controlling equity holder is expected to contribute new capital as a condition of retaining its equity position.

We recommend that KFO Holdings contribute approximately €35 million (approximately $38.2 million at current exchange rates of €1 = $1.0914) in new equity to TSL. The proceeds of this contribution would be used to provide immediate liquidity to the business and to fund transaction costs, including Calderwood & Harkness's fees, KHP's completion fee of $4.5 million, and other advisory and professional costs associated with the restructuring.

In addition to the equity contribution, the family must accept dilution from 80% to approximately 68% as a result of the 15% equity allocation to BMC as part of the mezzanine notes exchange. This dilution, while significant in percentage terms, preserves the family's majority control and is far preferable to the alternative of complete equity elimination in a Chapter 11 proceeding.

3. Discussion Points for Chairman Kostandinos. We recommend that Dimitrios Kostandinos and Elena Kostandinos-Pavlou be briefed in detail on the following matters, with the objective of securing their full commitment to the RSA framework before approaching creditors:

The equity contribution and dilution are the family's principal concessions; the alternative is far worse. In a Chapter 11 proceeding, the family would almost certainly lose its entire equity position — a 100% loss. By contrast, the proposed RSA preserves the family's majority control at 68% (versus 80% today), at the cost of a €35 million equity contribution and a 12-percentage-point dilution. This is a favorable outcome given the severity of TSL's financial distress.

Elena Kostandinos-Pavlou's individual position. Elena's 18% stake would be diluted to approximately 15.3% (18% × 85% = 15.3%). She should understand that this dilution is a necessary component of the BMC exchange and that her agreement is essential. If Elena has concerns about the dilution, we should address them promptly and privately, before they become an issue in the broader negotiation.

Dimitrios Kostandinos's individual position. Dimitrios's 62% stake would be diluted to approximately 52.7% (62% × 85% = 52.7%). While this represents a meaningful reduction, Dimitrios would retain a clear majority position and would continue to exercise effective control over the company.

Family combined position. The family's combined stake of 68% (52.7% + 15.3%) preserves majority control and all associated governance rights, including the ability to appoint the board and control strategic decisions. This outcome is available only through the out-of-court path; in a Chapter 11, the family would likely have no equity at all.

KHP valuation analysis and Chapter 11 waterfall. We strongly recommend arranging a session in which James Calloway of KHP presents the valuation analysis and Chapter 11 waterfall to Dimitrios and Elena in detail, with our team present to answer legal questions. This presentation will underscore the urgency of the situation and provide the family with the factual foundation needed to make an informed decision about the equity contribution and dilution.

IV. The Chapter 11 Contingency Plan as Negotiating Leverage

A. Overview of Contingency Plan

Calderwood & Harkness, in coordination with KHP and the broader advisory team, completed a comprehensive Chapter 11 execution plan on January 10, 2023 (the "Playbook"). The Playbook was developed not only as a genuine contingency for the protection of TSL and its stakeholders in the event that an out-of-court restructuring proves unachievable, but also as a critical source of negotiating leverage in the RSA discussions. The existence of a credible, fully-developed filing plan demonstrates to all creditor constituencies that TSL has alternatives and is not negotiating from a position of desperation.

The key elements of the Playbook are as follows:

Filing Entity. The proposed filing entity is Thalassa Americas Inc. only. The Greek parent, TSL, would not be a debtor in the Chapter 11 case. This structure is designed to limit the scope of the filing to the U.S. subsidiary, preserving TSL's global operations and avoiding the jurisdictional and procedural complications that would arise from a multi-entity cross-border filing.

Filing Venue. The United States Bankruptcy Court for the Southern District of Texas (Houston Division). Houston was selected based on TAI's principal office at 1400 McKinney Street, Suite 2200, Houston, TX 77010, which provides a firm basis for venue under 28 U.S.C. § 1408. The Southern District of Texas has a well-developed bankruptcy bench with extensive experience in large Chapter 11 cases, including shipping and energy matters, and offers procedural efficiencies that would support an expedited timeline.

DIP Financing. A $75 million superpriority debtor-in-possession financing facility has been committed by Nordbank International AG and Triton Credit Partners LP, pursuant to a term sheet received December 15, 2022. The DIP facility would bear interest at SOFR + 600 basis points, with a 0.50% commitment fee and a 12-month maturity. The DIP facility would provide TAI with the liquidity necessary to operate during the Chapter 11 case and would fund the administrative costs of the proceeding. As a superpriority facility, the DIP claims would prime all existing liens, including the first-lien senior secured facility and BMC's second-lien position.

Chief Restructuring Officer. Alderney Management Advisors LLC has been engaged on a standby basis to provide a Chief Restructuring Officer ("CRO") if a filing proceeds. Richard "Rick" Thornberg, the CRO designee, is a seasoned restructuring professional with extensive experience in shipping and transportation Chapter 11 cases. Mr. Thornberg is available on short notice to assume the CRO role and has been briefed on TSL's financial position and operational profile.

Claims and Noticing Agent. Pendleton Claim Services Inc. has been engaged on a standby basis since November 15, 2022. Laura Pendleton, President, has confirmed the firm's capacity to handle the anticipated claims volume and noticing requirements.

Key Milestones. The Playbook contemplates the following timeline from the petition date:

Estimated Administrative Costs. We estimate that the administrative costs of the Chapter 11 case would total approximately $18.5 million for the first twelve months, inclusive of debtor's counsel fees, financial advisory fees, CRO fees, claims agent fees, creditors' committee counsel and advisor fees, and other professional costs. These costs would be paid as administrative expenses of the estate, ahead of all prepetition claims.

B. Chapter 15 Cross-Border Dimension

In the event that a broader restructuring involving the Greek parent becomes necessary, a Chapter 15 recognition proceeding could be coordinated with TAI's Chapter 11 case. If TSL were to commence proceedings under Greek Law 4738/2020 (the Greek Debt Settlement & Insolvency Code, effective March 1, 2021), the Greek proceeding would be the "foreign main proceeding," and a Chapter 15 petition could be filed in the United States seeking recognition and enforcement of the Greek proceeding's orders.

Greek counsel Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, lead partner) has been advising on the Greek insolvency implications of various restructuring scenarios. TSL's center of main interests ("COMI") is in Piraeus, Greece, based on TSL's registered office, principal office, and the location of its management and operations. Accordingly, recognition as a foreign main proceeding under Chapter 15 would be expected if a Chapter 15 petition were filed.

We note, however, that the current restructuring strategy is designed to avoid triggering any Greek insolvency proceeding. The RSA path contemplates an out-of-court restructuring that does not require court oversight in any jurisdiction. The Chapter 15 contingency is relevant only in the event that

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 780 Third Avenue New York, NY 10017
Matter No.: 1044-00003
MEMORANDUM
Date: January 25, 2023
To: Georgios Andreadis, Chief Executive Officer, Thalassa Shipping & Logistics SA Dimitrios Kostandinos, Chairman of the Board, Thalassa Shipping & Logistics SA / KFO Holdings SA
From: Nathaniel Bower, Partner Amy Chesterton, Associate
Re: Restructuring Support Agreement — Negotiation Strategy and Stakeholder Analysis
This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the named recipients and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
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I. Executive Summary
This memorandum provides a comprehensive analysis of the negotiating positions, motivations, and likely demands of each creditor constituency in the Thalassa Shipping & Logistics SA ("TSL") capital structure, and recommends a strategy for achieving an out-of-court restructuring through a Restructuring Support Agreement ("RSA"), thereby averting a Chapter 11 filing by Thalassa Americas Inc. ("TAI"), TSL's principal U.S. operating subsidiary.
TSL faces a severe liquidity crisis driven by a prolonged and deepening contraction in the global dry-bulk shipping market. Revenue declined from €1.42 billion in fiscal year 2021 to an estimated €987 million in fiscal year 2022, representing a decline of approximately 30.5%. This deterioration is directly attributable to the collapse in dry-bulk charter rates: the Baltic Dry Index ("BDI") declined approximately 58% between January 2022 and September 2022, and TSL's average daily time charter equivalent ("TCE") fell from $24,800 per day to $11,200 per day in the third quarter of 2022. These market conditions have dramatically compressed TSL's earnings, cash flow generation capacity, and asset values across the entire fleet.
As of September 30, 2022, TSL's consolidated total debt stands at approximately $847.3 million, measured against a fleet appraised at $623 million by Drakos Maritime Valuations (report dated November 1, 2022), which is itself down from $891 million in January 2022 — a decline of approximately $268 million, or 30.1%, in less than ten months. Kensington Veltrian Partners LLC ("KHP"), TSL's financial advisor, has estimated the enterprise value of the TSL group at $580 million to $640 million, with a midpoint of $610 million. These figures underscore that the company is deeply overleveraged relative to current market conditions and that multiple creditor classes are impaired on a mark-to-market basis.
The forbearance agreement executed on October 10, 2022 — providing for a 90-day standstill among the senior secured lenders — was extended once to March 8, 2023. While a further extension may be sought if negotiations require additional time, such an extension cannot be taken for granted. The Ad Hoc Group of Senior Secured Lenders and their advisors have signaled growing impatience with the pace of discussions, and any further extension will likely require meaningful progress toward a definitive deal framework.
In parallel, and as a critical component of our overall strategy, we have developed a comprehensive Chapter 11 contingency plan for TAI (the "Playbook"), which contemplates a voluntary petition in the United States Bankruptcy Court for the Southern District of Texas (Houston Division). The Playbook was substantially completed on January 10, 2023, and includes a committed DIP financing term sheet from Nordbank International AG and Triton Credit Partners LP for $75 million, a CRO engagement on standby with Alderney Management Advisors LLC, and retention of Pendleton Claim Services Inc. as claims and noticing agent. The Playbook provides critical leverage in negotiations with all creditor constituencies. However, the out-of-court path remains strongly preferred, given the estimated Chapter 11 administrative costs of $18.5 million for the first twelve months alone, as well as the significant reputational harm, customer defection risk, potential for vessel arrests in foreign jurisdictions, and operational disruption to TSL's global fleet operations that would inevitably accompany a bankruptcy filing.
Based on our analysis, we recommend pursuing an RSA that achieves the following core objectives:
(a) provides meaningful relief to TSL on its senior secured debt service obligations through a maturity extension, covenant reset, and partial PIK conversion;
(b) offers Dralvecen Mezzanine Capital LLC ("BMC"), the holder of TSL's $112.3 million mezzanine notes, a blended recovery that exceeds its Chapter 11 alternative through a combination of new second-lien notes and equity in TSL;
(c) leaves the unsecured notes ($50 million, 8.25% cash pay) and trade creditors ($38.7 million) entirely unimpaired, minimizing negotiation complexity and preserving essential commercial relationships; and
(d) is supported by a new equity contribution of approximately €35 million (approximately $38.2 million at current exchange rates) from the Kostandinos family through KFO Holdings SA, demonstrating the family's commitment to the restructured enterprise and providing necessary liquidity to fund the transition.
The remainder of this memorandum sets forth the detailed capital structure overview, stakeholder-by-stakeholder negotiating analysis, Chapter 11 contingency plan considerations, proposed RSA framework, negotiation timeline, key risk factors, and recommended immediate client actions.
II. Capital Structure Overview and Recovery Analysis
This section provides a detailed overview of each layer of the TSL capital structure as of September 30, 2022, including the identity of holders, key terms, outstanding amounts, collateral, covenant status, and our analysis of estimated recoveries under both the proposed out-of-court RSA and a Chapter 11 liquidation or reorganization scenario. The recovery analysis is based on the KHP enterprise valuation range of $580 million to $640 million (midpoint $610 million) and the Drakos Maritime Valuations fleet appraisal of $623 million, each as described in greater detail below.
A. Senior Secured Credit Facility
The senior secured credit facility was originally entered into on June 15, 2019, with TSL as borrower and TAI as co-borrower on the U.S. Tranche. Nordbank International AG serves as both administrative agent and collateral agent under the facility.
The facility was originally committed at an aggregate amount of $685 million, structured in three tranches:
Term Loan A ("TLA"): Original principal of $400 million, amortizing at $10 million per quarter. Through the period from the third quarter of 2019 through the third quarter of 2022, thirteen quarterly amortization payments have been made, resulting in aggregate amortization of $130 million. The outstanding principal balance of the TLA as of September 30, 2022 is therefore $270 million.
Revolving Credit Facility ("Revolver"): Total commitment of $200 million. As of September 30, 2022, $185 million has been drawn, with $15 million of undrawn availability remaining. The Revolver has been substantially utilized to fund working capital needs during the downturn, and we note that the remaining undrawn capacity provides only minimal liquidity cushion.
U.S. Tranche (Term Loan B, or "TLB"): Principal of $85 million, structured as a non-amortizing bullet maturity. TAI is the co-borrower on this tranche, which is the principal basis for TAI's obligations under the credit facility and the jurisdictional nexus for the Chapter 11 contingency plan.
Total Outstanding: The aggregate outstanding balance under the senior secured credit facility is $540 million ($270 million TLA + $185 million Revolver + $85 million TLB).
The applicable interest rate is the Secured Overnight Financing Rate ("SOFR") plus 375 basis points, with a default rate of an additional 200 basis points applicable upon the occurrence and continuance of an event of default. The maturity date for all tranches is June 15, 2024, which is approximately seventeen months from the date of this memorandum and represents the most acute near-term pressure point in TSL's capital structure.
The facility is secured by first-priority liens on substantially all of TSL's and TAI's assets, including: thirty-eight (38) dry-bulk carriers; twelve (12) container vessels; the Houston terminal lease (held by TAI); all accounts receivable of TSL and TAI; and the equity interests in TAI and fourteen (14) vessel-owning special purpose vehicles ("SPVs"). This comprehensive collateral package provides the senior secured lenders with a substantial asset base, although the declining trajectory of fleet values introduces meaningful uncertainty as to the adequacy of collateral coverage on a going-forward basis.
Covenant Breaches. As of the most recent testing dates, TSL is in breach of three financial covenants under the credit agreement:
Minimum Liquidity: Actual liquidity of $27.3 million as of September 15, 2022, versus a required minimum of $40 million, representing a shortfall of $12.7 million.
Maximum Net Leverage Ratio: As of September 30, 2022, TSL's Net Leverage Ratio stood at 7.82x, calculated as Net Debt of $770.9 million divided by LTM EBITDA of $98.6 million. The covenant maximum is 5.50x. The breach is substantial, reflecting both the growth of net debt and the compression of EBITDA due to falling charter rates.
Minimum Interest Coverage Ratio: As of September 30, 2022, TSL's Interest Coverage Ratio stood at 1.74x, calculated as LTM EBITDA of $98.6 million divided by LTM Interest Expense of $56.7 million. The covenant minimum is 2.50x.
Each of these breaches constitutes an event of default under the credit agreement. The forbearance agreement executed on October 10, 2022, and subsequently extended to March 8, 2023, provides a temporary waiver of the lenders' remedies arising from these defaults, but the underlying defaults remain outstanding and must be addressed through either a covenant reset in the proposed amendment or a permanent waiver.
Recovery Analysis. At the fleet appraised value of $623 million (Drakos Maritime Valuations, November 1, 2022), the senior secured lenders are likely covered in full or near-full on their $540 million outstanding principal. At KHP's midpoint enterprise value of $610 million, the senior secured recovery is $540 million out of $540 million, or 100%. Even at KHP's low-end enterprise value of $580 million, the senior secured lenders would recover $540 million out of $540 million, or 100%, as the enterprise value exceeds the senior secured claim. This full-coverage position is an important factor in the negotiating dynamic: the senior secured lenders are not facing a principal write-down under any reasonable scenario, which should moderate their negotiating posture and orient them toward maturity extension and covenant relief rather than aggressive enforcement.
The TLA CUSIP is 87265BAA7.
B. Mezzanine Notes
The mezzanine notes are held in their entirety by Dralvecen Mezzanine Capital LLC ("BMC"), a New York-based private credit fund with offices at 600 Lexington Avenue, 22nd Floor, New York, NY 10022. The key contact at BMC is Rebecca Quimby, Senior Partner, who has been the primary decision-maker with respect to BMC's position in the TSL capital structure throughout the restructuring process.
BMC is represented by Kellner & Foss LLP, with Theodore Kellner serving as lead partner and Samantha Ong as the senior associate. K&F's offices are located at 1185 Avenue of the Americas, 30th Floor, New York, NY 10036. Mr. Kellner is an experienced restructuring practitioner with a reputation for pragmatic, deal-oriented negotiation, which we view as a favorable factor in our assessment of the likely negotiation dynamic with BMC.
The mezzanine notes were originally issued in the principal amount of $100 million. The notes bear interest at a rate of 11.5% on a PIK toggle basis, and BMC has elected PIK treatment on all interest payments since the second quarter of 2022. Through September 30, 2022, $12.3 million in PIK interest has been capitalized, bringing the total outstanding principal balance to $112.3 million. The maturity date is December 15, 2024.
The mezzanine notes are secured by second-priority liens on the same collateral that secures the senior secured credit facility, pursuant to an Intercreditor Agreement dated June 15, 2019, between Nordbank International AG (as first-lien agent) and BMC (as second-lien holder). The Intercreditor Agreement contains customary subordination provisions, including a standstill on second-lien enforcement for 180 days following notification of default, purchase option rights, and limitations on BMC's ability to challenge first-lien actions.
Recovery Analysis. The mezzanine notes represent the fulcrum security in TSL's capital structure — meaning that the mezzanine is the class of debt where the enterprise value "breaks" and recoveries begin to decline below par. Our recovery analysis, based on the KHP enterprise valuation, is as follows:
Midpoint Enterprise Value ($610 million): Recovery = ($610M – $540M senior secured) / $112.3M = $70 million / $112.3 million = 62.3%.
Low-End Enterprise Value ($580 million): Recovery = ($580M – $540M senior secured) / $112.3M = $40 million / $112.3 million = 35.6%.
High-End Enterprise Value ($640 million): Recovery = ($640M – $540M senior secured) / $112.3M = $100 million / $112.3 million = 89.0%.
These recovery estimates illustrate the wide range of outcomes available to BMC and underscore why the mezzanine notes are the critical negotiating fulcrum. BMC's leverage in negotiations is relatively limited given its subordinated position and the constraints of the Intercreditor Agreement, but BMC retains the ability to delay or complicate a consensual deal. In a Chapter 11 proceeding, BMC would constitute an impaired class whose vote would be required for plan confirmation absent a cramdown under 11 U.S.C. § 1129(b). Given the complexity and cost of a cramdown proceeding, obtaining BMC's consent to the RSA is strongly preferred.
C. Unsecured Notes
TSL has outstanding $50 million in aggregate principal amount of unsecured notes, bearing interest at 8.25% per annum, payable semi-annually in cash on June 1 and December 1 of each year. The notes mature on March 1, 2025. The indenture trustee is Garrison Trust Company, located at 100 Wall Street, 16th Floor, New York, NY 10005. The CUSIP for the unsecured notes is 87265BAB5.
On December 1, 2022, TSL failed to make the scheduled semi-annual interest payment of $2,062,500 (calculated as $50 million × 8.25% ÷ 2). The indenture provides for a 30-day cure period following a missed payment, which expired on January 1, 2023 without the payment having been made. This failure constitutes an event of default under the indenture, and the unsecured noteholders (or Garrison Trust Company, acting on their behalf) now have the right to accelerate the outstanding principal and accrued interest.
An informal group of unsecured noteholders has retained Ashford, Brightmoor Group & McKay PC as counsel, with Carolyn Brightmoor Group serving as lead partner and Robert Mancini as the senior associate on the matter. ADM's offices are located at 299 Park Avenue, 18th Floor, New York, NY 10171. We have had preliminary contact with Ms. Brightmoor Group, who has indicated her clients' strong preference for a consensual resolution that addresses the missed payment.
Recovery Analysis. In a Chapter 11 proceeding, the unsecured noteholders would be classified as general unsecured creditors. Based on KHP's waterfall analysis, the estimated recovery for general unsecured creditors is 8 to 14 cents on the dollar. This devastating outcome is a direct function of the significant senior secured and mezzanine claims that stand ahead of the unsecured notes in the priority waterfall. Accordingly, the unsecured noteholders have an overwhelming incentive to support any out-of-court resolution that pays them in full or near-full.
We note that the event of default under the unsecured notes indenture presents a cross-default risk that could propagate through the capital structure, potentially triggering acceleration provisions in the mezzanine notes and further complicating the negotiating environment. Prompt resolution of this default — through payment of the missed coupon at or before RSA closing — is therefore an important element of our proposed strategy.
D. Trade Creditors
As of September 30, 2022, TSL had approximately $38.7 million in outstanding trade payables. The largest single trade creditor is Olympian Fuel & Supply SA, a bunker fuel supplier headquartered in Piraeus, Greece, which is owed approximately $9.2 million. Other significant trade creditors include port service providers, ship maintenance and drydocking contractors, classification society fees, insurance premiums, and various operational supply vendors.
In a Chapter 11 proceeding, trade creditors would be classified as general unsecured creditors and would share in the same 8 to 14 cents on the dollar recovery estimated for the unsecured noteholders, absent a critical vendor designation obtained through a first-day motion. Even with critical vendor treatment, the process would create significant uncertainty for suppliers and could result in the loss of essential vendor relationships — particularly the bunker fuel supply relationship with Olympian, which is critical to fleet operations.
Strategy. We propose to pay all trade creditors in full in the ordinary course, without any impairment or modification of their existing terms. The impairment of trade creditors is unnecessary to achieve the financial objectives of the restructuring, and any attempt to reduce or defer trade payables would jeopardize TSL's ongoing fleet operations, damage critical commercial relationships, and introduce needless complexity into the RSA negotiation process.
E. Intercompany Note
TAI owes TSL $76.4 million under a subordinated intercompany note, bearing interest at 5.0% per annum. This intercompany obligation reflects historical capital flows from the Greek parent to the U.S. subsidiary and raises a number of issues in the restructuring context.
Most significantly, if TAI were to file Chapter 11, the intercompany note would present substantive consolidation risk. TSL, as the holder of the note, would be a creditor of the TAI estate, and other creditors could seek to consolidate the TSL and TAI estates on the basis that the entities were operated as a single economic unit, that intercompany transactions lacked arm's-length terms, or that the entities had commingled assets. We analyzed these issues in detail in our memorandum dated December 5, 2022, and concluded that while the substantive consolidation risk is manageable, it is a meaningful litigation exposure that weighs in favor of the out-of-court path.
Strategy. As part of the RSA, we propose to restructure the intercompany note by extending its maturity to December 2028, reducing the interest rate from 5.0% to 2.0%, and confirming the note's subordination to all senior secured and second-lien indebtedness. These modifications will improve TAI's cash flow profile, reduce the intercompany friction that has contributed to the U.S. subsidiary's liquidity challenges, and help mitigate any preference or fraudulent transfer risk associated with historical interest payments on the note.
F. Equity.  KFO Holdings SA, the Kostandinos family holding company, holds 80% of TSL's equity. The family's holdings are divided between Dimitrios Kostandinos, who holds 62%, and Elena Kostandinos-Pavlou, who holds 18%. The remaining 20% is held by non-family investors.
In a Chapter 11 scenario, existing equity would likely be significantly diluted or eliminated entirely. Under the absolute priority rule, equity holders are not entitled to receive any distribution until all senior classes of claims have been paid in full. Given the substantial shortfall between TSL's enterprise value ($580 million to $640 million) and its total debt obligations, equity has no residual value on a strict balance-sheet basis. TSL's total indebtedness — excluding trade payables — consists of $540 million senior secured, $112.3 million mezzanine, $50 million unsecured notes, and $76.4 million intercompany, totaling $778.7 million, which exceeds even KHP's high-end enterprise value estimate of $640 million by $138.7 million.
However, the out-of-court context permits a different calculus. The going-concern value of the TSL platform — including its fleet management infrastructure, long-standing charter relationships, operational expertise, and the Kostandinos family's deep industry relationships — supports preserving the family's equity position. Moreover, the family's willingness to contribute new capital (€35 million) provides a basis for creditors to accept the family's continued majority ownership as part of the negotiated exchange. In the out-of-court deal, the family can retain a majority position while contributing meaningful new capital, a result that would be difficult or impossible to achieve in a Chapter 11 proceeding where the absolute priority rule would likely mandate full equitization.
III. Stakeholder-by-Stakeholder Negotiating Analysis
This section provides a detailed analysis of each creditor constituency's composition, motivations, likely demands, and our recommended negotiating approach. The analysis is intended to guide our engagement strategy and to anticipate the key points of contention that will arise during the RSA negotiation process.
A. The Ad Hoc Group of Senior Secured Lenders
1. Composition and Voting Power.  The Ad Hoc Group of Senior Secured Lenders was formed in August 2022 in response to TSL's deteriorating financial performance and the emerging covenant breaches. The group comprises four institutional lenders:
The Ad Hoc Group is represented by Whitfield, Crane & Burgess LLP ("WCB"), with Graham Whitfield III serving as lead partner and Priya Nandakumar as the senior associate. WCB's offices are located at 51 West 52nd Street, 38th Floor, New York, NY 10019. The group's financial advisor is Draycott Advisory Group LLC ("Draycott"), with Vanessa Chow, Partner, serving as lead advisor. Draycott's offices are at 520 Madison Avenue, 20th Floor, New York, NY 10022.
With combined holdings of $372 million, the Ad Hoc Group controls 54.3% of the total facility commitment and approximately 68.9% of the outstanding balance of $540 million. This concentration of holdings gives the group de facto control over the direction of the senior secured lending group, though — as discussed in Section III.B below — the non-Ad-Hoc lenders hold a material minority position and cannot be ignored.
2. Key Interests and Motivations.  The senior secured lenders' primary concern is the protection of their collateral value. At the current fleet appraised value of $623 million, the senior secured lenders enjoy comfortable coverage on their $540 million outstanding principal, with a loan-to-value ratio of approximately 86.7%. However, the trajectory of fleet values is concerning: the Drakos appraisal in January 2022 valued the fleet at $891 million, meaning that approximately $268 million in collateral value has evaporated in less than ten months. If dry-bulk charter rates continue to decline, further erosion of fleet values could bring the loan-to-value ratio uncomfortably close to — or even above — 100%, at which point the senior secured lenders' incentives shift dramatically toward enforcement.
At the same time, the senior secured lenders recognize that enforcement against a 50-vessel international fleet is a complex, time-consuming, and value-destructive undertaking. Foreclosure would require coordination across multiple jurisdictions, including Greece, the United States, Singapore, and various flag states. Fire-sale values for shipping assets in the current depressed market would almost certainly be well below the Drakos appraised value, potentially resulting in a meaningful principal shortfall for the senior secured lenders. The administrative and legal costs of a foreclosure proceeding would be substantial, and the process could take 12 to 24 months to complete.
Nordbank International AG occupies a particularly significant position as both the administrative and collateral agent under the credit facility and the single largest lender at $137 million. Nordbank has a strong institutional interest in avoiding a disorderly default that could trigger cross-defaults across Nordbank's broader shipping portfolio. Nordbank is also a major participant in the European shipping finance market, and a public default and enforcement action against a major Greek shipping group would have reputational implications for Nordbank within the industry.
Triton Credit Partners LP ($68 million) presents a more nuanced negotiating profile. Triton is one of the two proposed DIP lenders (along with Nordbank) under the Chapter 11 contingency plan, with a committed DIP facility of $75 million at SOFR + 600 basis points and a 0.50% commitment fee. The DIP facility would provide Triton with superpriority administrative expense claims, attractive economics, and enhanced leverage in any Chapter 11 case. This creates a mixed-incentive dynamic: while Triton may prefer the out-of-court path on balance, the availability of the DIP opportunity means that Triton's aversion to a Chapter 11 filing may be less intense than that of the other Ad Hoc Group members. We should be mindful of this dynamic in our negotiations with WCB and Draycott.
The Ad Hoc Group has been broadly cooperative during the forbearance period, extending the standstill once without significant resistance. However, the group expects meaningful concessions from equity and junior creditors as a condition of further forbearance and any permanent restructuring. The group's position — communicated informally through WCB — is that the restructuring must demonstrate (a) tangible equity contributions from the Kostandinos family, (b) a real deleveraging plan, and (c) a covenant framework that provides the lenders with meaningful protections going forward. These expectations are reasonable and should be addressed directly in our RSA proposal.
3. Likely Demands.  Based on our analysis of the senior secured lenders' position, our discussions with WCB and Draycott during the forbearance period, and market precedent for similar shipping restructurings, we anticipate the Ad Hoc Group will make the following principal demands:
Maturity Extension: The near-term maturity of June 15, 2024 is the single most critical problem in the capital structure. The Ad Hoc Group will require a meaningful extension — likely three to four years — to provide sufficient runway for TSL to execute its operational turnaround plan and for the shipping market cycle to recover.
Deleveraging: The Ad Hoc Group will insist on a concrete deleveraging program, including both asset sales and new equity contributions from the Kostandinos family. The group will want to see TSL's leverage ratio on a clear downward trajectory, supported by binding milestones.
Financial Covenant Reset: The existing covenants are plainly unachievable at current market conditions. The Ad Hoc Group will agree to a reset, but will insist on covenants that are realistic but not so loose as to be meaningless. Expect significant negotiation on the step-down schedule for the leverage ratio and the terms of any interest coverage waiver.
Amendment Fee: Market standard for a shipping credit facility amendment of this nature is 0.50% to 1.50% of outstanding principal. The Ad Hoc Group will likely open at 1.50% ($8.1 million) and may accept 1.00% ($5.4 million) as a reasonable compromise.
Waiver of Past Defaults: The group will agree to a retroactive waiver of the existing covenant defaults and default interest, but only as part of a comprehensive amendment package. The waiver will be conditioned on the effectiveness of all other RSA terms.
Reduction in Revolver Commitment: The group will likely seek to reduce its revolver exposure, particularly given that $185 million of the $200 million commitment has been drawn. A reduction from $200 million to $150 million — partially offset by the existing $15 million of undrawn capacity — is a reasonable outcome.
Mandatory Prepayment: The group will require that net cash proceeds from any vessel dispositions be applied to prepay the TLA on a mandatory basis, with no reinvestment exception or, at most, a narrowly tailored reinvestment right.
PIK Conversion: The Ad Hoc Group may agree to the conversion of a portion of TLA principal to PIK interest to reduce near-term cash debt service, provided that the PIK component does not materially increase the total principal exposure over the life of the amended facility. This is an area of alignment between TSL and the senior secured lenders, as reduced cash debt service benefits both parties.
4. Negotiating Approach.  Our recommended approach to the Ad Hoc Group is to engage Graham Whitfield III and Vanessa Chow early and frequently, proposing a framework that directly addresses their core concerns — maturity extension, deleveraging, and covenant reset — while preserving TSL's operational flexibility and the Kostandinos family's majority equity position.
The key elements of our engagement strategy are as follows:
First, we should emphasize forcefully that the Chapter 11 alternative would impose significant costs on the senior secured lenders. Even though the lenders are nominally fully covered at current valuations, a Chapter 11 filing would introduce: (i) $18.5 million in estimated administrative expenses that would be paid ahead of their secured claims; (ii) a $75 million DIP facility with superpriority claims that would prime their existing first-lien position; (iii) potential challenges to their liens, including avoidance actions and equitable subordination claims; (iv) delays of nine to twelve months or more, during which fleet values could continue to decline; and (v) reputational harm to TSL that would damage charter relationships and reduce the going-concern value of the enterprise, directly impairing the lenders' collateral.
Second, we should use the DIP term sheet from Nordbank and Triton as a bridge in the negotiations. The DIP terms — SOFR + 600 basis points, 0.50% commitment fee, 12-month maturity — demonstrate that even the proposed DIP lenders recognize that capital deployed to TSL in the current environment commands a significant premium. An amendment to the existing facility that provides broadly similar economics (including the amendment fee and reset coupon) would be economically preferable for the lenders compared to a DIP facility, because it avoids the administrative costs, complexity, and uncertainty of a Chapter 11 proceeding.
Third, we propose an amendment fee of 1.00% of outstanding principal ($540 million × 1.00% = $5.4 million), payable in kind, as a reasonable compromise. We anticipate that WCB will open at 1.50% ($8.1 million) and that we can negotiate to the 1.00% level, which is within the market range for comparable transactions.
Fourth, we should present the KFO equity contribution of €35 million (approximately $38.2 million) prominently in our discussions with the Ad Hoc Group. The equity contribution demonstrates the Kostandinos family's commitment to the restructured enterprise and provides tangible new value that enhances the senior secured lenders' recovery prospects. The senior secured lenders will want to know that the family has "skin in the game," and the equity contribution addresses this concern directly.
B. Non-Ad-Hoc-Group Senior Secured Lenders
1. Composition.  The remaining five senior secured lenders, who are not members of the Ad Hoc Group, hold an aggregate of $313 million, representing 45.7% of the total facility commitment:
2. Key Considerations.  These lenders are not represented by WCB or advised by Draycott, and each will need to be individually engaged and brought into the transaction. This presents both a logistical challenge and a potential holdout risk, but several factors work in our favor.
Most significantly, the Ad Hoc Group's majority position ($372 million / 68.9% of outstanding) means that the non-Ad-Hoc lenders are likely to follow the Ad Hoc Group's lead on amendment terms. This dynamic is typical in syndicated lending: once a majority lending group has agreed to a term sheet, minority lenders face strong pressure to participate, as the alternative — holding out against a majority-supported deal — is strategically unfavorable and often counterproductive.
Aegean Capital Bank SA ($110 million) deserves particular attention. As the second-largest individual lender behind Nordbank, Aegean holds a meaningful position that could be influential in building consensus. Aegean is a Greek institution, and its principal contact, Nikolaos Ventouris, has longstanding commercial relationships within the Greek shipping community. There is a potential for significant alignment between Aegean and TSL based on shared Greek commercial interests, cultural affinity, and Aegean's desire to maintain its relationship with the Kostandinos family and the broader Greek shipping industry. We recommend that Georgios Andreadis engage Mr. Ventouris directly and early in the process, leveraging the relationship to secure Aegean's support for the amendment framework.
The smaller holders — Caspian Asset Management Ltd. ($40 million) and Pelagos Institutional Credit Fund ($26 million) — may have less appetite for extended negotiations and may prefer a quick resolution. These institutions are likely to be followers rather than leaders in the negotiation, and their consent can be expected once the broader terms are agreed.
A critical procedural question concerns the requisite lender threshold for the proposed amendment. Under most syndicated credit agreements, routine amendments require the consent of lenders holding a majority (typically 50.1%) or two-thirds (66⅔%) of the outstanding commitments. However, certain "sacred rights" — including extensions of maturity and reductions in interest rate — typically require the unanimous consent of all affected lenders. We need to review the specific provisions of the credit agreement to confirm the applicable threshold. If unanimity is required for the maturity extension (as we suspect), all nine lenders must agree, making holdout risk a serious concern. We will address this risk through the strategy described below.
Strategy. Our approach is to secure agreement from the Ad Hoc Group first, arriving at a substantially agreed term sheet with WCB and Draycott, and then to approach the non-Ad-Hoc lenders with a package that is presented as a done deal subject only to their consent. This approach minimizes the opportunity for individual lender holdouts and creates momentum toward closing. We should be prepared, however, for the possibility that one or more non-Ad-Hoc lenders may seek side concessions or supplemental arrangements as a condition of their consent, and we should have contingency plans for addressing such requests.
C. Dralvecen Mezzanine Capital LLC (BMC)
1. Position.  BMC's $112.3 million mezzanine position ($100 million original principal plus $12.3 million in capitalized PIK interest through September 30, 2022) is the fulcrum security in TSL's capital structure. As the second-lien holder, BMC sits between the fully-covered senior secured lenders and the deeply out-of-the-money unsecured noteholders. The outcome for BMC depends critically on the enterprise value that is ultimately realized, and as such, BMC has the most at stake in the negotiation — and the most to gain or lose from the structure of the RSA.
BMC is represented by Kellner & Foss LLP, with Theodore Kellner as lead partner and Samantha Ong as senior associate. Mr. Kellner is an experienced restructuring attorney who has been involved in numerous shipping and transportation restructurings. He is known for a pragmatic, deal-oriented approach, though he is also a vigorous advocate for his clients' interests and should not be underestimated.
Rebecca Quimby, BMC's Senior Partner and the key decision-maker, is a sophisticated investor with deep experience in distressed debt and mezzanine lending. Ms. Quimby has participated in numerous shipping restructurings and understands the cyclical dynamics of the market. This sophistication cuts both ways: while it means that Ms. Quimby is likely to be realistic about BMC's recovery prospects and open to a structured negotiation, it also means that she will be well-equipped to identify and exploit any weaknesses in our proposal.
2. Key Interests and Motivations.  As the fulcrum security holder, BMC's primary interest is in maximizing its recovery, which at the KHP midpoint enterprise value of $610 million stands at approximately 62.3% of its $112.3 million claim in a Chapter 11 proceeding. However, this headline recovery figure understates the risks that BMC faces in a bankruptcy scenario, including administrative cost priming, DIP facility superpriority, delays, and value erosion, all of which would reduce BMC's actual recovery below the theoretical 62.3%.
BMC has a strong incentive to participate in any restructuring that provides a recovery better than its Chapter 11 alternative — and the out-of-court path can achieve this by avoiding the administrative costs and value destruction inherent in a bankruptcy proceeding. However, BMC also has a natural inclination to resist any deal that crystallizes a loss at current depressed valuations. Rebecca Quimby is likely to argue — correctly — that the shipping market is cyclical and that current valuations reflect a trough in the cycle. BMC may therefore resist a deep haircut on the face value of its claim, preferring instead to preserve upside exposure through equity participation or other mechanisms that allow it to benefit from a recovery in charter rates.
We expect BMC to seek equity conversion as a central element of any restructuring exchange. An equity stake in the restructured TSL would allow BMC to participate in the upside if charter rates recover, effectively providing an option on future value creation that would not be available in a Chapter 11 proceeding. BMC will also likely seek governance rights — such as board observation rights or board seats — commensurate with its expected equity position.
Additionally, BMC's PIK interest continues to accrue at 11.5%, growing the principal balance of the mezzanine notes with every passing quarter. This accretion works in BMC's favor in the short term but also creates pressure to reach a resolution: if the restructuring is delayed, the growing mezzanine claim further compresses the value available for other constituencies and increases the complexity of the deal.
3. Likely Demands.  Based on our analysis, we anticipate that BMC will advance the following principal demands in the RSA negotiations:
Equity Stake: BMC will demand a meaningful equity stake in TSL as part of the exchange, to participate in any upside recovery if charter rates improve. We expect BMC to open at 20–25% equity and to settle in the range of 12–18%.
New Secured Notes: BMC will seek new second-lien notes with a face value as close to par as possible, a reasonable coupon, and a maturity that provides BMC with a defined path to repayment. BMC is likely to resist any face-value reduction greater than 40–50%.
Cyclical Valuation Argument: BMC will argue strenuously that current valuations are temporarily depressed and do not reflect the long-term value of the TSL fleet and business platform. This argument has merit — the shipping cycle will eventually turn — and we should be prepared to engage with it rather than dismiss it. The equity component of our proposal directly addresses this concern by giving BMC exposure to future value recovery.
Board Observation / Governance Rights: As a significant equity holder, BMC will seek governance protections, including board representation or observation rights, information rights, and anti-dilution protections. These demands are reasonable and should be conceded within appropriate limits.
Anti-Dilution Protections: BMC will want protections against future dilution of its equity stake, including preemptive rights on future equity issuances and customary anti-dilution adjustments for stock splits, dividends, and similar corporate events.
4. Negotiating Approach.  Our recommended approach to BMC is to propose an exchange of the $112.3 million mezzanine notes for a combination of new second-lien notes with a substantially reduced face value and equity in TSL. Specifically, we propose:
New Second-Lien Notes: $60 million in new second-lien notes, bearing interest at 10.0% PIK, with a maturity of June 2028. The new notes would be secured by second-priority liens on the same collateral as the existing mezzanine notes, subject to an Amended and Restated Intercreditor Agreement between Nordbank and BMC.
Equity: 15% equity in TSL, calculated on a fully-diluted basis after giving effect to the equity allocation.
This proposal represents a 46.6% haircut on the debt component (($112.3 million – $60 million) / $112.3 million = 46.6%), which is at the aggressive end of what we believe BMC will accept. However, the equity component provides meaningful upside that compensates for the debt haircut. The combined package gives BMC a blended recovery that exceeds its Chapter 11 recovery: $60 million in new notes (with PIK accretion and second-lien security) plus equity with meaningful upside potential, compared to approximately $70 million in Chapter 11 at the midpoint enterprise value with no equity participation and nine to twelve months of delay and uncertainty.
When presenting this proposal to Theodore Kellner and Rebecca Quimby, we should frame the Chapter 11 alternative clearly and specifically:
In a Chapter 11 proceeding, BMC would face: (i) $18.5 million in estimated administrative expenses that would be paid ahead of BMC's second-lien claims; (ii) a $75 million DIP facility from Nordbank and Triton with superpriority claims that would further prime BMC's position; (iii) a timeline of nine to twelve months from petition to effective date, during which fleet values could continue to decline; (iv) the uncertainty of a contested plan process, with no guarantee that BMC would receive better treatment than the Chapter 11 waterfall analysis suggests; and (v) no equity participation in the reorganized entity, meaning BMC would receive only the cash or debt distributable under the plan, with no option on future upside.
The 15% equity dilution to BMC would reduce the Kostandinos family's combined stake from 80% to approximately 68% (80% × 85% = 68%), and the non-family equity from 20% to approximately 17% (20% × 85% = 17%). This dilution must be presented to and approved by the Kostandinos family before it is tabled in negotiations with BMC. Specifically:
Dimitrios Kostandinos's personal stake would be diluted from 62% to approximately 52.7% (62% × 85% = 52.7%).
Elena Kostandinos-Pavlou's stake would be diluted from 18% to approximately 15.3% (18% × 85% = 15.3%).
The family would retain a combined 68% stake, preserving majority control and all associated governance rights.
We recommend engaging Theodore Kellner at K&F early with this framework. As noted above, Mr. Kellner is a pragmatic practitioner who will appreciate a structured, well-supported proposal backed by KHP's valuation analysis. An early presentation of a comprehensive package — rather than a series of incremental proposals — will establish credibility and accelerate the negotiation process. We should also arrange for James Calloway of KHP to participate in a presentation to BMC's advisory team, walking through the valuation methodology and waterfall analysis in detail.
D. Unsecured Noteholders
1. Position.  The unsecured noteholders hold $50 million in aggregate principal amount of 8.25% cash-pay notes due March 1, 2025. The notes are currently in default following the failure to pay the December 1, 2022 semi-annual coupon of $2,062,500, with the 30-day cure period having expired on January 1, 2023.
An informal group of unsecured noteholders has formed and retained Ashford, Brightmoor Group & McKay PC ("ADM") as counsel, with Carolyn Brightmoor Group as lead partner and Robert Mancini as senior associate.
2. Key Interests and Motivations.  The unsecured noteholders occupy a uniquely vulnerable position in the TSL capital structure. In a Chapter 11 proceeding, their recovery would be catastrophic: 8 to 14 cents on the dollar based on KHP's waterfall analysis. This outcome reflects the enormous weight of secured and mezzanine claims that stand ahead of the unsecured notes in the priority waterfall. There is simply insufficient value in the enterprise to provide a meaningful distribution to general unsecured creditors after the senior secured facility ($540 million) and mezzanine notes ($112.3 million) have been satisfied.
Accordingly, the unsecured noteholders have an overwhelming incentive to cooperate with any deal that pays them in full or near-full. The difference between 100 cents recovery under an unimpaired treatment and 8-14 cents in a Chapter 11 is dramatic, and this disparity gives us significant leverage in our dealings with the unsecured noteholder group. The noteholders' primary concerns are straightforward: receiving the missed December 2022 coupon, obtaining assurance of future payments through the March 2025 maturity, and avoiding the catastrophic outcomes associated with a bankruptcy filing.
At the same time, the event of default under the unsecured notes indenture provides the noteholders with modest leverage that they would not otherwise possess. The cross-default provisions in other TSL debt instruments mean that the unsecured note default has the potential to cascade through the capital structure, triggering additional defaults and further complicating the negotiating environment. This cross-default risk provides Carolyn Brightmoor Group with a bargaining chip — albeit a modest one — in negotiations.
3. Negotiating Approach.  We propose to leave the unsecured notes entirely unimpaired under the RSA. Specifically, we would:
(a) Pay the missed December 1, 2022 coupon of $2,062,500 in full at or promptly following RSA closing;
(b) Maintain the unsecured notes on their existing terms (8.25% cash pay, semi-annual, maturing March 1, 2025) without any modification to principal, interest rate, maturity, or other terms; and
(c) Obtain a consent and waiver from Garrison Trust Company (as indenture trustee), acting on behalf of the unsecured noteholders through ADM, waiving the existing event of default under the indenture, conditioned upon payment of the missed coupon at closing.
This approach offers several significant advantages. First, it minimizes negotiation complexity by eliminating the need for an indenture amendment or consent solicitation process, which would require majority holder consent, involve Garrison Trust Company, and add weeks or months to the transaction timeline. Second, it avoids the risk of noteholder opposition and potential litigation over the terms of any impairment. Third, it preserves the goodwill of the unsecured noteholder community, which is beneficial for TSL's credit market reputation. Fourth, the cost of unimpaired treatment is modest: the missed coupon payment of $2,062,500 is a small price to pay for the elimination of a potentially disruptive creditor constituency from the RSA negotiations.
Carolyn Brightmoor Group and the unsecured noteholder group should be highly receptive to this treatment. We recommend communicating the proposed unimpaired treatment to ADM early in the process, which will remove the unsecured noteholders as a source of friction and allow us to focus our negotiating resources on the more complex discussions with WCB (senior secured) and K&F (mezzanine).
E. Trade Creditors
1. Position.  TSL has approximately $38.7 million in outstanding trade payables as of September 30, 2022. The largest single trade creditor is Olympian Fuel & Supply SA, a bunker fuel supplier headquartered in Piraeus, which is owed approximately $9.2 million. Other significant trade creditors include port services providers, ship repair and maintenance contractors, classification societies, marine insurers, and various operational supply vendors. These relationships are essential to TSL's day-to-day fleet operations. Bunker fuel is the single largest operating expense for any shipping company, and a disruption in the fuel supply chain would have immediate and severe operational consequences, potentially grounding vessels and breaching charter party obligations.
2. Negotiating Approach.  We propose to pay all trade creditors in full in the ordinary course, without any impairment, deferral, or modification of existing payment terms. Trade creditors are not parties to the RSA negotiations, and the treatment of trade claims should be confirmed in the RSA term sheet but requires no separate negotiation or documentation.
This approach is consistent with both operational necessity and restructuring best practices. In a Chapter 11 proceeding, TSL would need to file critical vendor motions for key suppliers including Olympian Fuel & Supply — motions that are routinely contested by creditors' committees and are subject to judicial discretion. The out-of-court RSA path eliminates this risk entirely and preserves TSL's trade relationships on their existing terms, which is essential for the continued operation of the fleet during and after the restructuring process.
F. KFO Holdings SA / Kostandinos Family
1. Position.  KFO Holdings SA is the Kostandinos family holding company, headquartered at 42 Akti Miaouli, Piraeus, Greece — the same building as TSL's principal offices. KFO holds 80% of TSL's equity, divided between Dimitrios Kostandinos (62%) and Elena Kostandinos-Pavlou (18%). The remaining 20% is held by non-family investors.
In a Chapter 11 scenario, the Kostandinos family's equity position would likely be significantly diluted or eliminated entirely. Under the absolute priority rule, equity holders cannot receive any distribution until all senior classes of claims have been paid in full. Given the magnitude of TSL's funded debt ($778.7 million excluding trade) relative to its enterprise value ($580 million to $640 million), there is no realistic scenario under which existing equity would receive a meaningful distribution in a Chapter 11 proceeding.
Beyond the financial exposure, the Kostandinos family has a deep reputational and legacy interest in maintaining control of the Thalassa business. TSL was founded in 1987 by the Kostandinos family and has grown over 35 years into a significant global shipping platform. The family's identity, reputation, and standing within the Greek shipping community are inextricably linked to the Thalassa name. The loss of control — or the public humiliation of a bankruptcy filing — would be deeply damaging to the family on a personal and reputational level, beyond the financial consequences.
2. Expected Contribution and Concessions.  The Kostandinos family's participation in the RSA is a critical prerequisite for creditor buy-in. The Ad Hoc Group of Senior Secured Lenders has made clear, through informal communications via WCB, that any restructuring must include a meaningful equity contribution from the family. This expectation is reasonable and consistent with market practice: in virtually every out-of-court shipping restructuring, the controlling equity holder is expected to contribute new capital as a condition of retaining its equity position.
We recommend that KFO Holdings contribute approximately €35 million (approximately $38.2 million at current exchange rates of €1 = $1.0914) in new equity to TSL. The proceeds of this contribution would be used to provide immediate liquidity to the business and to fund transaction costs, including Calderwood & Harkness's fees, KHP's completion fee of $4.5 million, and other advisory and professional costs associated with the restructuring.
In addition to the equity contribution, the family must accept dilution from 80% to approximately 68% as a result of the 15% equity allocation to BMC as part of the mezzanine notes exchange. This dilution, while significant in percentage terms, preserves the family's majority control and is far preferable to the alternative of complete equity elimination in a Chapter 11 proceeding.
3. Discussion Points for Chairman Kostandinos.  We recommend that Dimitrios Kostandinos and Elena Kostandinos-Pavlou be briefed in detail on the following matters, with the objective of securing their full commitment to the RSA framework before approaching creditors:
The equity contribution and dilution are the family's principal concessions; the alternative is far worse. In a Chapter 11 proceeding, the family would almost certainly lose its entire equity position — a 100% loss. By contrast, the proposed RSA preserves the family's majority control at 68% (versus 80% today), at the cost of a €35 million equity contribution and a 12-percentage-point dilution. This is a favorable outcome given the severity of TSL's financial distress.
Elena Kostandinos-Pavlou's individual position. Elena's 18% stake would be diluted to approximately 15.3% (18% × 85% = 15.3%). She should understand that this dilution is a necessary component of the BMC exchange and that her agreement is essential. If Elena has concerns about the dilution, we should address them promptly and privately, before they become an issue in the broader negotiation.
Dimitrios Kostandinos's individual position. Dimitrios's 62% stake would be diluted to approximately 52.7% (62% × 85% = 52.7%). While this represents a meaningful reduction, Dimitrios would retain a clear majority position and would continue to exercise effective control over the company.
Family combined position. The family's combined stake of 68% (52.7% + 15.3%) preserves majority control and all associated governance rights, including the ability to appoint the board and control strategic decisions. This outcome is available only through the out-of-court path; in a Chapter 11, the family would likely have no equity at all.
KHP valuation analysis and Chapter 11 waterfall. We strongly recommend arranging a session in which James Calloway of KHP presents the valuation analysis and Chapter 11 waterfall to Dimitrios and Elena in detail, with our team present to answer legal questions. This presentation will underscore the urgency of the situation and provide the family with the factual foundation needed to make an informed decision about the equity contribution and dilution.
IV. The Chapter 11 Contingency Plan as Negotiating Leverage
A. Overview of Contingency Plan
Calderwood & Harkness, in coordination with KHP and the broader advisory team, completed a comprehensive Chapter 11 execution plan on January 10, 2023 (the "Playbook"). The Playbook was developed not only as a genuine contingency for the protection of TSL and its stakeholders in the event that an out-of-court restructuring proves unachievable, but also as a critical source of negotiating leverage in the RSA discussions. The existence of a credible, fully-developed filing plan demonstrates to all creditor constituencies that TSL has alternatives and is not negotiating from a position of desperation.
The key elements of the Playbook are as follows:
Filing Entity. The proposed filing entity is Thalassa Americas Inc. only. The Greek parent, TSL, would not be a debtor in the Chapter 11 case. This structure is designed to limit the scope of the filing to the U.S. subsidiary, preserving TSL's global operations and avoiding the jurisdictional and procedural complications that would arise from a multi-entity cross-border filing.
Filing Venue. The United States Bankruptcy Court for the Southern District of Texas (Houston Division). Houston was selected based on TAI's principal office at 1400 McKinney Street, Suite 2200, Houston, TX 77010, which provides a firm basis for venue under 28 U.S.C. § 1408. The Southern District of Texas has a well-developed bankruptcy bench with extensive experience in large Chapter 11 cases, including shipping and energy matters, and offers procedural efficiencies that would support an expedited timeline.
DIP Financing. A $75 million superpriority debtor-in-possession financing facility has been committed by Nordbank International AG and Triton Credit Partners LP, pursuant to a term sheet received December 15, 2022. The DIP facility would bear interest at SOFR + 600 basis points, with a 0.50% commitment fee and a 12-month maturity. The DIP facility would provide TAI with the liquidity necessary to operate during the Chapter 11 case and would fund the administrative costs of the proceeding. As a superpriority facility, the DIP claims would prime all existing liens, including the first-lien senior secured facility and BMC's second-lien position.
Chief Restructuring Officer. Alderney Management Advisors LLC has been engaged on a standby basis to provide a Chief Restructuring Officer ("CRO") if a filing proceeds. Richard "Rick" Thornberg, the CRO designee, is a seasoned restructuring professional with extensive experience in shipping and transportation Chapter 11 cases. Mr. Thornberg is available on short notice to assume the CRO role and has been briefed on TSL's financial position and operational profile.
Claims and Noticing Agent. Pendleton Claim Services Inc. has been engaged on a standby basis since November 15, 2022. Laura Pendleton, President, has confirmed the firm's capacity to handle the anticipated claims volume and noticing requirements.
Key Milestones. The Playbook contemplates the following timeline from the petition date:
Estimated Administrative Costs. We estimate that the administrative costs of the Chapter 11 case would total approximately $18.5 million for the first twelve months, inclusive of debtor's counsel fees, financial advisory fees, CRO fees, claims agent fees, creditors' committee counsel and advisor fees, and other professional costs. These costs would be paid as administrative expenses of the estate, ahead of all prepetition claims.
B. Chapter 15 Cross-Border Dimension
In the event that a broader restructuring involving the Greek parent becomes necessary, a Chapter 15 recognition proceeding could be coordinated with TAI's Chapter 11 case. If TSL were to commence proceedings under Greek Law 4738/2020 (the Greek Debt Settlement & Insolvency Code, effective March 1, 2021), the Greek proceeding would be the "foreign main proceeding," and a Chapter 15 petition could be filed in the United States seeking recognition and enforcement of the Greek proceeding's orders.
Greek counsel Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, lead partner) has been advising on the Greek insolvency implications of various restructuring scenarios. TSL's center of main interests ("COMI") is in Piraeus, Greece, based on TSL's registered office, principal office, and the location of its management and operations. Accordingly, recognition as a foreign main proceeding under Chapter 15 would be expected if a Chapter 15 petition were filed.
We note, however, that the current restructuring strategy is designed to avoid triggering any Greek insolvency proceeding. The RSA path contemplates an out-of-court restructuring that does not require court oversight in any jurisdiction. The Chapter 15 contingency is relevant only in the event that

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