CONFIDENTIAL — SUBJECT TO FRE 408 AND ALL APPLICABLE SETTLEMENT PRIVILEGES

CONFIDENTIAL — SUBJECT TO FRE 408 AND ALL APPLICABLE SETTLEMENT PRIVILEGES
REVISED TERM SHEET
RESTRUCTURING SUPPORT AGREEMENT
Thalassa Shipping & Logistics Société Anonyme and Thalassa Americas Inc.
February 10, 2023
This Revised Term Sheet reflects modifications agreed with counsel to the Ad Hoc Group of Senior Secured Lenders (Whitfield, Crane & Burgess LLP) and supersedes the Initial Draft dated February 3, 2023.
Prepared by: Calderwood & Harkness LLP 780 Third Avenue New York, NY 10017
Nathaniel Bower, Responsible Partner Colette Whitman, Billing Partner
Distribution: This Revised Term Sheet is circulated to all creditor constituencies on February 10, 2023, and is addressed to:
•  Whitfield, Crane & Burgess LLP (counsel to the Ad Hoc Group of Senior Secured Lenders), 51 West 52nd Street, 38th Floor, New York, NY 10019 — Attn: Graham Whitfield III, Partner
•  Kellner & Foss LLP (counsel to Dralvecen Mezzanine Capital LLC), 1185 Avenue of the Americas, 30th Floor, New York, NY 10036 — Attn: Theodore Kellner, Partner
•  Ashford, Brightmoor Group & McKay PC (counsel to the informal group of unsecured noteholders), New York, NY — Attn: Carolyn Brightmoor Group, Partner
•  Draycott Advisory Group LLC (financial advisor to the Ad Hoc Group of Senior Secured Lenders), 520 Madison Avenue, 20th Floor, New York, NY 10022 — Attn: Vanessa Chow, Partner
•  Kensington Veltrian Partners LLC (financial advisor to TSL/TAI), 300 Park Avenue, 12th Floor, New York, NY 10022 — Attn: James Calloway, Managing Director
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Section 1: Overview and Recitals
1.1 Background
Thalassa Shipping & Logistics Société Anonyme ("TSL" or the "Company") is a société anonyme organized and existing under the laws of the Hellenic Republic (Greece), with its registered office and principal place of business at 42 Akti Miaouli, Piraeus 18538, Greece. TSL was founded in 1987 by the Kostandinos family and has since grown to become a significant participant in the global dry-bulk and containerized shipping markets. TSL operates a diversified fleet of 50 vessels, comprised of 38 dry-bulk carriers and 12 container vessels, engaged in worldwide trade and integrated port-to-door logistics operations. TSL additionally owns and operates terminal facilities in Piraeus, Thessaloniki, and Houston, Texas.
Thalassa Americas Inc. ("TAI") is a wholly-owned subsidiary of TSL, organized as a C-Corporation under the laws of the State of Delaware, with its principal office located at 1400 McKinney Street, Suite 2200, Houston, TX 77010. TAI serves as the operational platform for TSL's Western Hemisphere commercial activities, including vessel chartering, logistics management, and terminal operations at the Houston facility.
Together, TSL and TAI employ approximately 4,200 persons globally, of whom approximately 680 are based in the United States. The Company's workforce includes seagoing officers and crew, shore-based commercial and technical management staff, terminal workers, and corporate administrative personnel.
For the fiscal year ended December 31, 2021, TSL reported consolidated revenue of approximately €1.42 billion, reflecting strong dry-bulk and container freight rate conditions prevailing during that period. For the fiscal year ended December 31, 2022 (estimated), TSL consolidated revenue declined to approximately €987 million, representing a year-over-year decline of approximately 30.5%. TAI's revenue for the same periods was approximately $312 million (FY2021) and approximately $198 million (FY2022, estimated), reflecting a proportionate decline in the U.S. operations.
1.2 Liquidity Crisis
Commencing in early 2022, the global dry-bulk shipping market experienced a severe and sustained downturn in charter rates. The Baltic Dry Index, the leading benchmark for dry-bulk freight rates, declined approximately 58% between January 2022 and September 2022. This decline had a direct and material adverse impact on TSL's revenue and cash flow generation. The average daily time-charter equivalent ("TCE") earned by TSL's dry-bulk fleet fell from $24,800 per day (FY2021 average) to approximately $11,200 per day (Q3 2022 average), a decline of approximately 54.8%.
The rapid deterioration in charter rates and the corresponding decline in operating cash flows triggered a series of covenant defaults under the Senior Secured Credit Agreement (as defined in Section 3.1 below):
(a) On September 15, 2022, TSL breached the Minimum Liquidity Covenant contained in Section 7.12(c) of the Senior Secured Credit Agreement. As of that date, TSL's actual unrestricted cash and cash equivalents totaled $27.3 million, which was $12.7 million below the required minimum of $40 million.
(b) As of September 30, 2022 (the end of Q3 2022), TSL breached the Maximum Net Leverage Ratio contained in Section 7.12(a) of the Senior Secured Credit Agreement. TSL's actual Net Leverage Ratio was 7.82x (calculated as Net Debt of approximately $770.9 million divided by LTM EBITDA of approximately $98.6 million), as compared to the required maximum of 5.50x.
(c) As of September 30, 2022, TSL simultaneously breached the Minimum Interest Coverage Ratio contained in Section 7.12(b) of the Senior Secured Credit Agreement. TSL's actual Interest Coverage Ratio was 1.74x (calculated as LTM EBITDA of approximately $98.6 million divided by LTM Interest Expense of approximately $56.7 million), as compared to the required minimum of 2.50x.
As of September 30, 2022, TSL's total consolidated indebtedness across all facilities and instruments was approximately $847.3 million. The TSL fleet was appraised by Drakos Maritime Valuations Ltd. (Athens, Greece) at an aggregate fair market value of $623 million as of November 1, 2022, reflecting a decline of approximately $268 million (30.1%) from the January 2022 valuation of $891 million. Kensington Veltrian Partners LLC ("KHP"), financial advisor to TSL and TAI, has estimated the total enterprise value of TSL at between $580 million and $640 million, with a midpoint of $610 million.
1.3 Forbearance Agreement
On October 10, 2022, TSL, TAI, and the Senior Secured Lender syndicate (acting through Nordbank International AG, as Administrative Agent) entered into a Forbearance Agreement (the "Forbearance Agreement"), pursuant to which the Senior Secured Lenders agreed to forbear from exercising their default-related rights and remedies for an initial period of 90 days, expiring on January 8, 2023. During the forbearance period, the parties engaged in extensive restructuring negotiations.
A first extension of the Forbearance Agreement was executed on January 8, 2023, extending the forbearance period through March 8, 2023. The parties anticipate entering into a second extension of the Forbearance Agreement (extending the standstill period to April 7, 2023), with this Revised Term Sheet intended to form the basis for a definitive Restructuring Support Agreement to be executed prior to the expiration of the second extended forbearance period.
The overarching purpose of this Revised Term Sheet and the contemplated restructuring transactions is to outline the principal terms of a comprehensive out-of-court restructuring designed to address TSL's and TAI's liquidity crisis, reset the capital structure to sustainable levels, and avert the need for a Chapter 11 filing by TAI or any insolvency proceeding under Greek Law 4738/2020 with respect to TSL.
1.4 Purpose
This Revised Term Sheet sets forth the material terms of a proposed Restructuring Support Agreement (the "RSA") among TSL, TAI, the Senior Secured Lenders (including the members of the Ad Hoc Group of Senior Secured Lenders), Dralvecen Mezzanine Capital LLC ("BMC"), and KFO Holdings Société Anonyme ("KFO Holdings" or "KFO"). Upon execution of the definitive RSA, each supporting party will commit to support and implement the restructuring transactions described herein on or before the Outside Date of June 30, 2023, subject to the conditions, milestones, and termination events set forth herein.
This Revised Term Sheet is non-binding, except that the provisions of Section 18 (Exclusivity and Confidentiality) shall be binding upon the parties upon signature of the acknowledgment pages attached hereto. All other provisions constitute a statement of the parties' current understanding and are subject to the negotiation and execution of definitive documentation. No party shall have any binding obligation with respect to the restructuring transactions (other than as set forth in Section 18 and as otherwise may arise under the Forbearance Agreement) unless and until the definitive RSA and related transaction documents are executed and delivered by all required parties.
Section 2: Parties
2.1 Company Parties
(a) Thalassa Shipping & Logistics Société Anonyme ("TSL") — A société anonyme organized and existing under the laws of the Hellenic Republic (Greece); AFM (Greek Tax Identification Number) 998214763; registered office at 42 Akti Miaouli, Piraeus 18538, Greece.
(b) Thalassa Americas Inc. ("TAI") — A C-Corporation organized and existing under the laws of the State of Delaware; EIN 84-3291057; registered agent: Capitol Registered Agents LLC, 1209 Orange Street, Wilmington, DE 19801; principal office at 1400 McKinney Street, Suite 2200, Houston, TX 77010.
TSL and TAI are collectively referred to herein as the "Company Parties."
2.2 Senior Secured Lender Parties
The following institutions are lenders under the Senior Secured Credit Agreement dated June 15, 2019, with respective commitments as set forth below:
The Senior Secured Lenders are collectively referred to herein as the "Senior Secured Lender Parties" or the "Lender Parties."
2.3 Ad Hoc Group of Senior Secured Lenders
An informal group (the "Ad Hoc Group") has been formed comprising the following Senior Secured Lenders:
The Ad Hoc Group's aggregate holdings represent approximately 54.3% of the total $685 million Senior Secured Credit Facility commitment. The Ad Hoc Group is represented by:
Legal Counsel: Whitfield, Crane & Burgess LLP, 51 West 52nd Street, 38th Floor, New York, NY 10019. Lead partner: Graham Whitfield III; senior associate: Priya Nandakumar.
Financial Advisor: Draycott Advisory Group LLC, 520 Madison Avenue, 20th Floor, New York, NY 10022. Vanessa Chow, Partner.
2.4 Mezzanine Lender
Dralvecen Mezzanine Capital LLC ("BMC"), 600 Lexington Avenue, 22nd Floor, New York, NY 10022. Senior Partner: Rebecca Quimby. BMC is the sole holder of the Mezzanine Notes (as defined in Section 3.2 below).
BMC is represented by Kellner & Foss LLP, 1185 Avenue of the Americas, 30th Floor, New York, NY 10036. Lead partner: Theodore Kellner; associate: Samantha Ong.
2.5 Equity Holders / Family Office
KFO Holdings Société Anonyme ("KFO Holdings" or "KFO"), 42 Akti Miaouli, Piraeus 18538, Greece. KFO Holdings is the family investment vehicle of the founding Kostandinos family and is the controlling equity holder of TSL. The beneficial owners of KFO Holdings are:
(a) Dimitrios Kostandinos, Chairman of the Board of Directors of TSL, holding (through KFO Holdings) 62% of the total outstanding equity of TSL; and
(b) Elena Kostandinos-Pavlou, Vice Chairwoman of the Board of Directors of TSL, holding (through KFO Holdings) 18% of the total outstanding equity of TSL.
The Kostandinos family's combined equity ownership represents 80% of the total outstanding equity of TSL prior to the restructuring transactions contemplated herein.
2.6 Indenture Trustee (Unsecured Notes)
Garrison Trust Company, 100 Wall Street, 16th Floor, New York, NY 10005. Garrison Trust Company serves as the indenture trustee under the indenture governing the 8.25% Senior Unsecured Notes due March 1, 2025 (as described in Section 3.3 below).
2.7 Advisors to the Company
The Company Parties have engaged the following professional advisors in connection with the restructuring:
Legal Counsel (U.S.): Calderwood & Harkness LLP, 780 Third Avenue, New York, NY 10017.
•  Nathaniel Bower — Responsible Partner
•  Colette Whitman — Billing Partner
•  Amy Chesterton — Lead Associate
•  Nathan Ikeda — Working Associate
•  Sylvia Hartwell — Specialist Tax Partner
Financial Advisor: Kensington Veltrian Partners LLC, 300 Park Avenue, 12th Floor, New York, NY 10022. James Calloway, Managing Director.
Greek Counsel: Vassiliou & Demetriou Law Offices, 15 Vasilissis Sofias Avenue, Athens 10674, Greece. Alexandros Vassiliou, Senior Partner.
Section 3: Existing Capital Structure
The following is a summary of TSL's and TAI's existing capital structure as of September 30, 2022, prior to giving effect to any of the restructuring transactions contemplated by this Revised Term Sheet.
3.1 Senior Secured Credit Facility
The Senior Secured Credit Facility was established pursuant to a Credit Agreement dated as of June 15, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senior Secured Credit Agreement"), entered into among TSL (as Borrower), TAI (as Co-Borrower with respect to the U.S. Tranche), Nordbank International AG (as Administrative Agent and Collateral Agent), and the lenders party thereto.
Total Commitment: $685,000,000
Tranches:
(i) Term Loan A ("TLA"): Original principal amount of $400,000,000; amortizing at $10,000,000 per quarter. From Q3 2019 through Q3 2022, 13 quarterly amortization payments have been made, totaling $130,000,000 in principal repayments. Outstanding balance as of September 30, 2022: $270,000,000.
(ii) Revolving Credit Facility ("Revolver"): Total commitment of $200,000,000. As of September 30, 2022, drawn to $185,000,000 ($15,000,000 remaining undrawn availability).
(iii) U.S. Tranche Term Loan B ("TLB"): Original and current principal amount of $85,000,000; non-amortizing, bullet maturity. TAI is the borrower on this tranche.
Total Outstanding as of September 30, 2022: $270,000,000 (TLA) + $185,000,000 (Revolver) + $85,000,000 (TLB) = $540,000,000.
Interest Rate: SOFR + 375 basis points per annum (cash pay). Default rate: SOFR + 575 basis points per annum (contractual rate plus 200 basis points).
Maturity Date: June 15, 2024.
CUSIP (Term Loan A): 87265BAA7.
Collateral: First-priority security interests in and liens on (a) 38 dry-bulk carriers, (b) 12 container vessels, (c) the Houston terminal lease and all related rights, (d) all accounts receivable of TSL and TAI, and (e) 100% of the equity interests in TAI and each of the 14 vessel-owning special purpose vehicles established under the Senior Secured Credit Agreement.
3.2 Mezzanine Notes
Issuance Date: June 15, 2019 (issued concurrently with the Senior Secured Credit Facility).
Holder: Dralvecen Mezzanine Capital LLC (sole holder).
Original Principal Amount: $100,000,000.
PIK Capitalized Interest: $12,300,000 (PIK interest accrued and capitalized through September 30, 2022; all interest has been paid in kind since Q2 2022).
Total Outstanding as of September 30, 2022: $112,300,000.
Interest Rate: 11.5% per annum, PIK toggle. All interest has been elected as PIK since Q2 2022, and no cash interest has been paid since that date.
Maturity Date: December 15, 2024.
Security: Second-priority security interests in and liens on the same collateral package as the Senior Secured Credit Facility.
Intercreditor Agreement: Intercreditor Agreement dated as of June 15, 2019, between Nordbank International AG (as first-lien agent) and Dralvecen Mezzanine Capital LLC, governing the relative rights, priorities, and remedies of the first-lien and second-lien creditors with respect to the shared collateral.
3.3 Unsecured Notes
Issuance Date: March 1, 2020.
Issuer: TSL.
Principal Outstanding: $50,000,000.
Interest Rate: 8.25% per annum, cash pay, payable semi-annually on June 1 and December 1.
CUSIP: 87265BAB5.
Maturity Date: March 1, 2025.
Indenture Trustee: Garrison Trust Company.
Missed Payment: The December 1, 2022 semi-annual interest payment of $2,062,500 (calculated as $50,000,000 × 8.25% ÷ 2) was not made when due. The 30-day cure period provided under the indenture expired on January 1, 2023, without cure having been effected, resulting in an event of default under the indenture.
3.4 Intercompany Note
Instrument: Subordinated intercompany promissory note.
Maker: Thalassa Americas Inc. (TAI).
Holder: Thalassa Shipping & Logistics SA (TSL).
Principal Amount: $76,400,000.
Interest Rate: 5.0% per annum.
Maturity: No stated maturity date in the original promissory note.
Subordination: The intercompany note is subordinated in right of payment to all external indebtedness of TAI, including obligations under the Senior Secured Credit Agreement, the Mezzanine Notes, and the Unsecured Notes.
3.5 Trade and Other Payables
Trade Payables: Approximately $38,700,000 as of September 30, 2022, representing amounts owed to vessel fuel (bunker) suppliers, port operators, stevedoring companies, spare parts vendors, and other trade counterparties incurred in the ordinary course of business.
The largest single trade creditor is Olympian Fuel & Supply SA (bunker fuel supplier), to which TSL owes approximately $9,200,000 as of September 30, 2022.
Other Payables: Approximately $29,900,000 as of September 30, 2022, including accrued employee compensation, insurance premiums payable, dry-docking accruals, port charges, and other accrued liabilities.
Summary — Total Indebtedness and Liabilities (as of September 30, 2022):
Section 4: Senior Secured Credit Facility Amendment
4.1 Amendment Overview
TSL, TAI, Nordbank International AG (as Administrative Agent and Collateral Agent), and the requisite lenders under the Senior Secured Credit Agreement shall enter into Amendment No. 1 to the Senior Secured Credit Agreement dated as of June 15, 2019 (the "Credit Agreement Amendment" or "Amendment No. 1"). The Credit Agreement Amendment will implement the modifications to the Senior Secured Credit Facility described in this Section 4. The Credit Agreement Amendment shall require the consent of lenders holding at least 66⅔% of the outstanding loans and commitments under the Senior Secured Credit Agreement, and shall be conditioned upon the simultaneous consummation of all other restructuring transactions described in this Revised Term Sheet.
4.2 Maturity Extension
The maturity date of each of the Term Loan A, the Revolving Credit Facility, and the U.S. Tranche Term Loan B shall be extended from June 15, 2024 to June 15, 2027, representing a three-year extension. This extension shall apply uniformly to all tranches under the Senior Secured Credit Facility.
4.3 TLA PIK Conversion
$75,000,000 of outstanding Term Loan A principal shall be converted from a cash-pay obligation to a payment-in-kind ("PIK") obligation (the "PIK TLA Tranche"). The remaining TLA balance of $195,000,000 (i.e., $270,000,000 less $75,000,000) shall continue to amortize in cash on the existing quarterly amortization schedule of $10,000,000 per quarter. Interest on the PIK TLA Tranche shall accrue and compound in kind on a quarterly basis, with no cash debt service payable on the PIK TLA Tranche until its maturity on June 15, 2027. The conversion of $75,000,000 of TLA principal to PIK provides immediate and material cash flow relief to the Company Parties by reducing quarterly cash debt service obligations.
4.4 Revolver Commitment Reduction
The total commitment under the Revolving Credit Facility shall be permanently reduced from $200,000,000 to $150,000,000. The currently outstanding Revolver balance of $185,000,000 shall be reduced to $150,000,000 through a mandatory prepayment of $35,000,000 to be made at or prior to the closing of the restructuring transactions. The source of funds for the $35,000,000 mandatory Revolver prepayment shall be the KFO Holdings equity contribution described in Section 7, together with available operating cash flow as needed. No further draws on the Revolver shall be permitted until the outstanding balance has been reduced to $150,000,000 or below. Following the commitment reduction, the full $150,000,000 commitment shall remain available (subject to the terms of the amended credit agreement).
4.5 Financial Covenant Reset
The financial maintenance covenants set forth in the Senior Secured Credit Agreement shall be amended and reset as follows:
Maximum Net Leverage Ratio:
(a) Through Q4 2023: Waived in its entirety.
(b) Q1 2024 through Q4 2024: 7.00x.
(c) Q1 2025 through Q4 2025: 6.25x. (Note: The initial draft dated February 3, 2023 proposed a step-down to 6.50x for this period. This has been revised to 6.25x to reflect the negotiated modification agreed with the Ad Hoc Group through Whitfield, Crane & Burgess LLP.)
(d) Q1 2026 and thereafter: 5.50x. (Note: The initial draft proposed a step-down to 5.50x by Q4 2026. At the Ad Hoc Group's request, the step-down to 5.50x has been accelerated by three quarters to Q1 2026.)
Minimum Interest Coverage Ratio:
(a) Through Q4 2023: Waived in its entirety.
(b) Q1 2024 through Q4 2024: 1.75x. (Note: The initial draft proposed 2.00x for the 2024 fiscal year. The Ad Hoc Group agreed to a reduced level of 1.75x for 2024, recognizing the Company's near-term cash flow constraints, in consideration of the immediate return to the 2.50x level commencing in 2025.)
(c) Q1 2025 and thereafter: 2.50x.
Minimum Liquidity:
(a) The Minimum Liquidity requirement shall be reduced from $40,000,000 to $30,000,000, effective upon the closing of the restructuring transactions.
(b) The Minimum Liquidity covenant shall be tested on a monthly basis.
4.6 Amendment Fee
An amendment fee equal to 1.00% of the total outstanding Senior Secured debt as of the date of the Credit Agreement Amendment shall be payable to the consenting Senior Secured Lenders. Based on $540,000,000 of outstanding Senior Secured debt, the amendment fee is $5,400,000. The amendment fee shall be payable in kind (i.e., capitalized and added to the applicable tranche balances on a pro rata basis among the Senior Secured Lenders) and shall not require any cash payment. The amendment fee shall be deemed earned upon execution of the definitive Credit Agreement Amendment and shall be payable (by capitalization) at the closing of the restructuring transactions.
Note: This provision reflects an agreed modification per Ad Hoc Group comments. The initial draft dated February 3, 2023 proposed an amendment fee of 0.75% ($4,050,000). At the request of the Ad Hoc Group, the fee has been increased to 1.00% ($5,400,000), an increase of $1,350,000, as part of the overall economic package agreed between the Company Parties and the Ad Hoc Group.
4.7 Default Interest Waiver
All default interest that has accrued on the outstanding Senior Secured debt from and after September 15, 2022 (the date of the first covenant breach) through the closing date of the restructuring transactions shall be waived retroactively in full. Default interest represents the incremental 200 basis points charged above the contractual interest rate (SOFR + 575 basis points vs. SOFR + 375 basis points). Upon the effectiveness of the Credit Agreement Amendment, the applicable interest rate on all tranches of the Senior Secured Credit Facility shall revert to the non-default contractual rate of SOFR + 375 basis points per annum.
Note: This provision reflects an agreed modification per Ad Hoc Group comments. The initial draft proposed a default interest waiver running only from October 10, 2022 (the date of the Forbearance Agreement). The Ad Hoc Group accepted a broader waiver commencing from September 15, 2022 (the date of the first covenant breach), thereby providing additional economic relief to the Company Parties. This concession was made in exchange for the increase in the amendment fee from 0.75% to 1.00% described in Section 4.6 above.
4.8 Mandatory Prepayments
The Credit Agreement Amendment shall include the following mandatory prepayment provisions:
(a) Vessel Sale Proceeds. 100% of the net cash proceeds from the sale of the six (6) designated dry-bulk carriers identified pursuant to Section 8 below (after deduction of customary sale costs, brokerage commissions, and applicable taxes) shall be applied as mandatory prepayments of the Term Loan A (cash-pay tranche) in accordance with the amortization schedule. No reinvestment right shall be available with respect to the designated vessel sales.
(b) Excess Cash Flow Sweep. 75% of Excess Cash Flow (as such term shall be defined in the Credit Agreement Amendment) in excess of $10,000,000 per fiscal year shall be applied as mandatory prepayments of the Term Loan A. The Excess Cash Flow sweep shall be calculated and applied on an annual basis, following delivery of audited financial statements.
4.9 Additional Covenants
The Credit Agreement Amendment shall include the following additional or modified covenants:
(a) Enhanced Reporting. TSL and TAI shall deliver quarterly financial statements (including consolidated and consolidating balance sheets, income statements, and cash flow statements) within 60 days of the end of each fiscal quarter. This represents an enhancement from the current 90-day reporting deadline under the existing credit agreement.
(b) Annual Fleet Appraisals. TSL shall obtain and deliver to the Administrative Agent an annual fleet appraisal from Drakos Maritime Valuations Ltd. or another independent appraiser of comparable reputation acceptable to the Administrative Agent, such appraisal to be delivered no later than 90 days following the end of each fiscal year.
(c) Minimum Fleet Value Test. The aggregate fair market value of the TSL fleet (as determined by the most recent annual appraisal) shall not be less than 125% of total outstanding Senior Secured debt. This covenant shall be tested semi-annually (as of June 30 and December 31 of each year).
(d) Negative Covenants. Limitations on additional indebtedness, liens, restricted payments, investments, asset sales, and affiliate transactions shall be maintained consistent with the existing Senior Secured Credit Agreement, subject to such modifications as are necessary to implement the restructuring transactions contemplated hereby.
(e) Information Covenants. TSL and TAI shall deliver (i) monthly liquidity reports (within 20 days of month-end) to the Administrative Agent and each member of the Ad Hoc Group, and (ii) quarterly compliance certificates (within 60 days of quarter-end) certifying compliance with all financial maintenance covenants.
Section 5: Mezzanine Notes Exchange
5.1 Exchange Terms
Dralvecen Mezzanine Capital LLC shall exchange the entirety of its existing Mezzanine Notes, having an aggregate outstanding principal balance of $112,300,000 (comprised of $100,000,000 in original principal and $12,300,000 of PIK-capitalized interest accrued through September 30, 2022), in consideration for:
(a) $60,000,000 in aggregate principal amount of newly issued second-lien notes (the "New Second-Lien Notes"), on the terms described in Section 5.2 below; plus
(b) Newly issued equity in TSL representing 15% of the total outstanding equity of TSL, calculated on a fully diluted basis after giving effect to such issuance, on the terms described in Section 5.3 below.
The exchange results in a debt haircut of approximately 46.6% on the debt component of BMC's claim, calculated as ($112,300,000 − $60,000,000) ÷ $112,300,000. The equity component is intended to provide BMC with additional recovery and upside participation to compensate for the significant principal reduction on the debt.
5.2 New Second-Lien Notes Terms
The New Second-Lien Notes shall be issued on the following terms:
Issuer: Thalassa Shipping & Logistics Société Anonyme (TSL).
Principal Amount: $60,000,000.
Interest Rate: 10.0% per annum, payable entirely in kind (PIK). Interest shall accrue and compound quarterly and shall be added to the outstanding principal balance of the New Second-Lien Notes. No cash interest shall be payable on the New Second-Lien Notes.
Maturity Date: June 2028.
Security: Second-priority security interests in and liens on the same collateral package as the Senior Secured Credit Facility, junior in all respects to the first-priority liens of the Senior Secured Lenders, and subject to the terms and conditions of the Amended and Restated Intercreditor Agreement (as described in Section 5.5 below).
Indenture Trustee: Garrison Trust Company.
Covenants: The New Second-Lien Notes shall contain a limited covenant package, the terms of which shall be negotiated in connection with the definitive documentation. No financial maintenance covenants shall be included at the second-lien level; compliance with financial maintenance covenants shall be tested solely at the first-lien level under the Senior Secured Credit Agreement.
Change of Control Put: Upon a Change of Control (to be defined), BMC shall have the right to put the New Second-Lien Notes to TSL at a price equal to 101% of the outstanding principal amount plus all accrued and unpaid PIK interest.
Mandatory Prepayment: TSL shall be required to apply 50% of the net cash proceeds from any equity issuance by TSL (other than the KFO Holdings equity contribution described in Section 7) as a mandatory prepayment of the New Second-Lien Notes.
5.3 Equity Issuance to BMC
In connection with the mezzanine exchange, TSL shall issue new equity to BMC representing 15% of the total outstanding equity of TSL, calculated on a fully diluted basis after giving effect to such issuance. The equity issuance shall result in the following dilution to existing equity holders:
The post-RSA ownership percentages are calculated as follows: existing holders' ownership is diluted by the 15% issuance to BMC (i.e., 80% × (1 − 15%) = 68% for the Kostandinos family; 20% × (1 − 15%) = 17% for non-family existing holders).
BMC shall receive customary minority shareholder protections, including but not limited to:
(a) Board observer rights (one observer seat on the TSL Board of Directors);
(b) Anti-dilution protections (weighted average broad-based anti-dilution in the event of future equity issuances below fair market value);
(c) Tag-along rights (right to participate pro rata in any sale by a majority equity holder);
(d) Information rights (access to financial statements, budgets, forecasts, and material contracts on the same basis as provided to the Senior Secured Lenders); and
(e) Consent rights with respect to specified material actions, to be negotiated in connection with the definitive documentation.
Registration Rights: None. TSL is a privately held company and is not publicly traded. No registration rights agreement shall be entered into in connection with the equity issuance to BMC.
5.4 Lock-Up
BMC shall enter into a lock-up agreement (the "Lock-Up Agreement") restricting the transfer, sale, assignment, pledge, or other disposition of (a) its equity interest in TSL and (b) the New Second-Lien Notes during the twelve (12)-month period following the closing date of the restructuring transactions. Customary exceptions shall apply, including transfers to affiliates of BMC (subject to the transferee's execution of a joinder to the Lock-Up Agreement) and transfers required by law or regulation.
5.5 Amended and Restated Intercreditor Agreement
The existing Intercreditor Agreement dated as of June 15, 2019, between Nordbank International AG (as first-lien agent) and Dralvecen Mezzanine Capital LLC, shall be amended and restated in its entirety (the "Amended and Restated Intercreditor Agreement") to reflect the issuance of the New Second-Lien Notes and the modified capital structure resulting from the restructuring transactions. The Amended and Restated Intercreditor Agreement shall include, among other provisions:
(a) Updated standstill periods during which BMC (as second-lien holder) may not exercise enforcement remedies with respect to the shared collateral;
(b) Limitations on second-lien enforcement actions, including a standstill period of not less than 180 days following delivery of an enforcement notice to the first-lien agent;
(c) Adequate protection provisions in any bankruptcy or insolvency proceeding;
(d) Lien subordination terms confirming the junior priority of the New Second-Lien Notes to the Senior Secured Credit Facility; and
(e) Provisions governing the application of collateral proceeds, including a waterfall consistent with the relative lien priorities.
Section 6: Treatment of Unsecured Notes
6.1 Unimpaired
The $50,000,000 aggregate principal amount of 8.25% Senior Unsecured Notes due March 1, 2025 (CUSIP 87265BAB5) (the "Unsecured Notes") shall remain outstanding and unmodified in all respects. No amendment, waiver, or modification of the indenture between TSL and Garrison Trust Company (as indenture trustee) shall be required or requested in connection with the restructuring transactions (other than the Consent and Waiver Letter described in Section 6.2 below with respect to the cure of the missed December 2022 coupon payment). The Unsecured Notes shall continue to be governed by their existing terms and conditions in all respects.
6.2 Cure of Missed Coupon
The missed December 1, 2022 semi-annual interest payment of $2,062,500 (calculated as $50,000,000 × 8.25% ÷ 2) shall be paid in full in cash at or prior to the closing of the restructuring transactions. The source of funds for such payment shall be the KFO Holdings equity contribution and/or available operating cash flow. Upon receipt of such payment, Garrison Trust Company (as indenture trustee) shall deliver a consent and waiver letter (the "Consent and Waiver Letter") waiving the event of default arising from the failure to make the December 1, 2022 interest payment, such waiver to be conditioned solely upon receipt of the full amount of the missed payment at or prior to closing.
Counsel to the informal group of unsecured noteholders (Ashford, Brightmoor Group & McKay PC; lead partner Carolyn Brightmoor Group) has been advised of the proposed treatment of the Unsecured Notes and has been requested to confirm its acceptability on behalf of the noteholder group.
6.3 Ongoing Obligations
Following the cure of the missed December 2022 coupon payment and the delivery of the Consent and Waiver Letter, all future coupon payments on the Unsecured Notes shall continue in accordance with the original indenture terms. Interest at 8.25% per annum shall continue to be payable semi-annually in cash on June 1 and December 1 of each year. No acceleration of the Unsecured Notes shall occur; the notes shall remain outstanding through their stated maturity date of March 1, 2025.
Section 7: KFO Holdings Equity Contribution
7.1 Contribution Amount
KFO Holdings Société Anonyme shall contribute €35,000,000 (thirty-five million euros) in new equity to TSL (the "KFO Equity Contribution"). Based on the EUR/USD exchange rate prevailing as of the date of this Revised Term Sheet (€1 = $1.0914), the approximate U.S. dollar equivalent of the KFO Equity Contribution is approximately $38,200,000. The actual U.S. dollar equivalent will be determined based on the exchange rate in effect on the date the contribution is funded.
7.2 Use of Proceeds
The proceeds of the KFO Equity Contribution shall be applied by TSL and TAI as follows:
(a) To fund TSL's liquidity to bring the Company above the reset Minimum Liquidity covenant level of $30,000,000 established under the Credit Agreement Amendment;
(b) To fund the mandatory Revolver prepayment of $35,000,000 to reduce the outstanding drawn balance from $185,000,000 to $150,000,000, as required under Section 4.4;
(c) To pay transaction costs incurred in connection with the restructuring transactions, including (i) legal fees of Calderwood & Harkness LLP, (ii) the completion fee of $4,500,000 payable to Kensington Veltrian Partners LLC upon closing, (iii) fees of Vassiliou & Demetriou Law Offices, and (iv) such other professional advisor fees and expenses as are payable at or in connection with closing; and
(d) To cure the missed December 1, 2022 unsecured note coupon payment of $2,062,500.
7.3 Equity Subscription Agreement
The KFO Equity Contribution shall be documented through a definitive Equity Subscription Agreement (the "Equity Subscription Agreement") to be entered into between TSL and KFO Holdings, containing customary representations, warranties, covenants, and conditions precedent to funding, including representations as to the authority of KFO Holdings to enter into the agreement, the source of funds, and the absence of any encumbrances on the contributed equity. The Equity Subscription Agreement shall be executed concurrently with the definitive RSA and shall be a condition to the closing of the restructuring transactions.
Section 8: Vessel Dispositions
8.1 Asset Sale Undertaking
TSL shall undertake to sell six (6) older dry-bulk carriers from its fleet, having an average age of approximately 18 years, within twelve (12) months of the closing of the restructuring transactions (the "Vessel Disposition Program"). The estimated aggregate gross sale proceeds from such dispositions are approximately $72,000,000. The specific vessels to be designated for sale shall be identified in a side letter agreement (the "Side Letter Agreement") to be executed concurrently with the definitive RSA by TSL and Nordbank International AG (as Administrative Agent), with input from the Ad Hoc Group.
8.2 Application of Proceeds
Net cash proceeds from the sale of each designated vessel (calculated as gross sale proceeds less customary sale costs, brokerage commissions, and applicable taxes) shall be applied as mandatory prepayments of the Term Loan A in accordance with Section 4.8(a) above. No reinvestment right shall be available to TSL with respect to the net proceeds of the designated vessel sales. Each prepayment shall be applied in accordance with the amortization schedule and the terms of the Credit Agreement Amendment.
8.3 Sale Process
Each designated vessel shall be marketed through a commercially reasonable sale process. TSL shall engage reputable sale-and-purchase brokers and shall use commercially reasonable efforts to achieve the best available price for each vessel. The Side Letter Agreement shall establish a minimum price floor for each designated vessel. If the applicable minimum price is not achieved for any vessel within nine (9) months of the commencement of marketing, TSL and Nordbank International AG (as Administrative Agent) shall confer in good faith on alternative disposition strategies, which may include a reduction in the minimum price floor, alternative sale structures, or other commercially reasonable approaches. Notwithstanding the foregoing, the twelve (12)-month deadline for completion of all six vessel sales remains a hard outside date, and failure to complete the sales within such period shall constitute a breach of the RSA.
Prior to commencing the marketing of each designated vessel, TSL shall obtain an independent appraisal of such vessel from Drakos Maritime Valuations Ltd. (Captain Nikos Drakos) or another independent appraiser of comparable reputation acceptable to the Administrative Agent, and shall deliver such appraisal to the Administrative Agent and each member of the Ad Hoc Group.
Section 9: Intercompany Note Restructuring
9.1 Amended Terms
The $76,400,000 subordinated intercompany promissory note from Thalassa Americas Inc. (as maker) to Thalassa Shipping & Logistics SA (as holder) (the "Intercompany Note") shall be amended and restated to reflect the following modifications:
(a) Maturity Extension: The maturity date of the Intercompany Note shall be extended to December 2028.
(b) Interest Rate Reduction: The interest rate on the Intercompany Note shall be reduced from 5.0% per annum to 2.0% per annum.
(c) Subordination: The subordination of the Intercompany Note to all external indebtedness of TAI and TSL — including the Senior Secured Credit Facility, the New Second-Lien Notes, and the Unsecured Notes — shall be expressly confirmed and reinforced in the amended and restated Intercompany Note.
9.2 Rationale
The reduction in the intercompany interest rate from 5.0% to 2.0% is designed to reduce cash outflows from TAI to TSL, thereby improving TAI's U.S. liquidity position and its ability to service its obligations under the U.S. Tranche Term Loan B. The extension of the maturity date to December 2028 eliminates near-term principal repayment risk at the TAI level and aligns the intercompany note maturity with the broader restructured capital structure.
Section 10: Trade Creditors
10.1 Unimpaired
All trade creditors of TSL and TAI (approximately $38,700,000 in aggregate outstanding trade payables as of September 30, 2022) shall be paid in full in the ordinary course of business in accordance with their existing terms. No impairment, standstill, extension, or modification of trade obligations is contemplated or requested as part of the restructuring transactions. The largest trade creditor, Olympian Fuel & Supply SA (owed approximately $9,200,000), shall continue to be paid in accordance with existing contractual terms. The Company Parties believe that leaving trade claims entirely unimpaired is essential to maintaining the continuity of business operations, the supply chain, and counterparty relationships, all of which are critical to the Company's ability to generate cash flows sufficient to service the restructured debt.
Section 11: Conditions Precedent to RSA Execution and Closing
11.1 RSA Execution Conditions
The following conditions must be satisfied prior to or concurrent with the execution of the definitive RSA:
(a) Joinder by Senior Secured Lenders holding at least 66⅔% of outstanding commitments under the Senior Secured Credit Facility. Based on $540,000,000 of outstanding Senior Secured debt, the required threshold is at least $360,000,000. The Ad Hoc Group alone holds $372,000,000, representing approximately 54.3% of the outstanding facility — additional lender support beyond the Ad Hoc Group will be required to reach the 66⅔% threshold.
(b) Written agreement of Dralvecen Mezzanine Capital LLC to the mezzanine exchange terms described in Section 5.
(c) Written commitment of KFO Holdings Société Anonyme to the €35,000,000 equity contribution described in Section 7.
(d) Execution of a forbearance extension or waiver sufficient to provide adequate runway from the date of RSA execution through the anticipated closing date, ensuring that the Senior Secured Lenders' rights and remedies remain forborne during the documentation and closing process.
11.2 RSA Closing Conditions
The closing of the restructuring transactions contemplated by the definitive RSA (the "RSA Closing") shall be subject to the satisfaction or waiver of the following conditions precedent:
(a) Definitive Documentation. Execution and delivery of all of the following definitive transaction documents:
(i) Amendment No. 1 to the Senior Secured Credit Agreement;
(ii) Amended and Restated Intercreditor Agreement;
(iii) New Second-Lien Note Purchase Agreement;
(iv) New Second-Lien Notes Indenture;
(v) Equity Subscription Agreement (KFO Holdings);
(vi) Amended and Restated Intercompany Promissory Note;
(vii) Lock-Up Agreement (BMC);
(viii) Side Letter Agreement (Vessel Dispositions);
(ix) Consent and Waiver Letter (Garrison Trust Company); and
(x) Joinder Agreements (all consenting lenders).
(b) KFO Equity Contribution. Receipt by TSL of the KFO Equity Contribution of €35,000,000 in immediately available funds.
(c) Unsecured Note Coupon Cure. Payment of the missed December 1, 2022 unsecured note coupon payment of $2,062,500 to Garrison Trust Company (as indenture trustee) for distribution to the holders of the Unsecured Notes.
(d) Legal Opinions. Delivery of legal opinions from Calderwood & Harkness LLP addressed to the Administrative Agent and the consenting lenders, covering (i) due authorization and enforceability of the definitive transaction documents as to TAI, and (ii) no conflicts/no violations as to TAI.
(e) Closing Certificates. Delivery of:
(i) A secretary's certificate of TAI certifying true and complete copies of the certificate of incorporation, bylaws, and board resolutions of TAI;
(ii) An officer's certificate executed by Marcus Hale (President of TAI) certifying the accuracy of the representations and warranties and the satisfaction of the conditions to closing; and
(iii) A solvency certificate executed by Diana Restrepo (VP Finance of TAI) certifying the solvency of TAI after giving effect to the restructuring transactions.
(f) No Material Adverse Change. No material adverse change shall have occurred in TSL's or TAI's business, assets, financial condition, results of operations, or prospects between the date of RSA execution and the RSA Closing date.
(g) No Bankruptcy Filing. Neither TSL nor TAI shall have filed a voluntary petition under chapter 7 or chapter 11 of the U.S. Bankruptcy Code or commenced insolvency proceedings under any applicable foreign law, including Greek Law 4738/2020.
(h) Corporate Authorizations. All necessary corporate authorizations (including board of directors approvals and, if required, shareholder approvals) shall have been obtained for each of TSL, TAI, and KFO Holdings with respect to the restructuring transactions.
(i) Greek Law Requirements. All requirements under applicable Greek law for the consummation of the restructuring transactions (including the equity issuance to BMC and the corporate actions of TSL and KFO Holdings) shall have been satisfied, as confirmed by Vassiliou & Demetriou Law Offices, Athens.
(j) Professional Fees. Payment of all accrued and outstanding professional fees and expenses owed by TSL and TAI, including without limitation the fees of Calderwood & Harkness LLP, Kensington Veltrian Partners LLC (including the $4,500,000 completion fee), Whitfield, Crane & Burgess LLP, Kellner & Foss LLP, Ashford, Brightmoor Group & McKay PC, Draycott Advisory Group LLC, and Vassiliou & Demetriou Law Offices, in each case as agreed among the parties.
Section 12: Milestones and Outside Date
12.1 Key Milestones
The following milestones shall govern the timeline for the execution and consummation of the restructuring transactions:
12.2 Outside Date
The Outside Date for the consummation of the restructuring transactions shall be June 30, 2023. If all conditions to the RSA Closing (as set forth in Section 11.2) are not satisfied or waived on or before the Outside Date, the RSA shall automatically terminate and the obligations of the parties thereunder shall be of no further force or effect, without any action required by any party.
Termination of the RSA pursuant to this Section 12.2 shall not affect, impair, or release any rights, remedies, obligations, or liabilities of any party under the existing Senior Secured Credit Agreement, the Mezzanine Notes, the Unsecured Notes, the Forbearance Agreement (including any extensions thereof), or any other agreement or instrument that is in effect independently of the RSA.
Section 13: Termination Events
13.1 Company Termination Events
The Company Parties shall have the right to terminate the RSA upon the occurrence of any of the following events:
(a) A material breach by any supporting creditor party of its obligations under the RSA that is not cured within five (5) business days after delivery of written notice of such breach by the Company Parties to the breaching party; or
(b) A material adverse change in applicable law (whether by statute, regulation, judicial decision, or otherwise) that renders the consummation of the restructuring transactions illegal or impracticable.
13.2 Creditor Termination Events
The consenting creditor parties (acting by the requisite consenting lenders as defined in the RSA) shall have the right to terminate the RSA upon the occurrence of any of the following events:
(a) A material breach by TSL, TAI, or KFO Holdings of their respective obligations under the RSA that is not cured within five (5) business days after delivery of written notice of such breach by the requisite consenting lenders to the breaching party;
(b) The filing of a voluntary petition by TSL or TAI under chapter 7 or chapter 11 of the U.S. Bankruptcy Code, or the commencement by TSL of voluntary insolvency proceedings under any applicable foreign law;
(c) The entry of an order for relief against TSL or TAI in an involuntary bankruptcy or insolvency proceeding under the U.S. Bankruptcy Code or any applicable foreign law;
(d) The commencement by TSL of insolvency proceedings under Greek Law 4738/2020 (Code for the Resolution of Debts and the Granting of a Second Chance) without the prior written consent of the requisite consenting lenders;
(e) The failure of TSL, TAI, or KFO Holdings to meet any milestone set forth in Section 12 by the applicable target date, unless such failure is waived by the requisite consenting lenders; or
(f) The occurrence of a material adverse change in TSL's or TAI's business, financial condition, assets, results of operations, or operations, as determined in good faith by the requisite consenting lenders.
Section 14: Releases and Exculpation
14.1 Mutual Releases
Upon the RSA Closing, TSL, TAI, KFO Holdings, and each consenting creditor party (and their respective current and former directors, officers, employees, agents, advisors, representatives, principals, members, partners, shareholders, attorneys, financial advisors, consultants, and controlled affiliates) shall exchange mutual releases (the "Mutual Releases") of any and all claims, causes of action, demands, liabilities, damages, costs, and expenses of any kind or nature (whether known or unknown, whether at law or in equity, whether accrued or contingent) arising from, related to, or in connection with (a) the Senior Secured Credit Agreement and the transactions thereunder, (b) the Mezzanine Notes and the transactions thereunder, (c) the events and circumstances giving rise to the covenant defaults and the liquidity crisis described in Section 1.2, (d) the Forbearance Agreement and the negotiations related thereto, and (e) the negotiation and execution of the RSA and the restructuring transactions.
Carve-Outs: The Mutual Releases shall not release or discharge any claim arising from or attributable to (i) fraud, (ii) willful misconduct, or (iii) gross negligence on the part of the released party.
14.2 D&O Protection
The existing directors' and officers' liability insurance policy maintained by TSL and TAI with Promontory Indemnity Insurance Co. (Policy No. PII-DO-2022-08847; aggregate limit of liability of $25,000,000), as brokered by Seaward & Beckett Insurance Brokers Ltd., shall be maintained in full force and effect through the RSA Closing and for a six (6)-year tail period thereafter. The Company Parties shall not take any action to cancel, reduce, or materially alter the coverage provided by such policy without the prior written consent of the requisite consenting lenders. All indemnification provisions contained in TSL's articles of association and TAI's certificate of incorporation and bylaws shall remain in full force and effect and shall not be amended, modified, or terminated in any manner that would adversely affect the rights of any current or former director or officer of TSL or TAI.
Section 15: Governance
15.1 Board Composition
The Board of Directors of TSL shall remain as currently constituted following the RSA Closing. The current board includes:
•  Dimitrios Kostandinos — Chairman of the Board
•  Elena Kostandinos-Pavlou — Vice Chairwoman of the Board
•  Georgios Andreadis — Chief Executive Officer and Director
•  Such other directors as are currently serving on the TSL Board
Upon the issuance of 15% equity to BMC, BMC shall be entitled to appoint one (1) board observer to attend meetings of the TSL Board of Directors (without voting rights). The board observer shall be entitled to receive all materials distributed to members of the Board of Directors and shall be entitled to participate in board discussions, subject to customary exclusions for conflicts of interest and attorney-client privileged matters.
The Ad Hoc Group of Senior Secured Lenders reserves the right to request the appointment of one (1) independent director to the TSL Board of Directors within ninety (90) days of the RSA Closing. The qualifications and selection process for such independent director, if requested, shall be subject to further discussion among the parties.
15.2 Management
The existing senior management of TSL and TAI shall remain in place following the RSA Closing:
•  Georgios Andreadis — Chief Executive Officer, TSL
•  Irini Dalakoura — Chief Financial Officer, TSL
•  Marcus Hale — President, TAI
•  Diana Restrepo — Vice President, Finance, TAI
•  Jonathan Kurtz — Vice President, Operations, TAI
No Chief Restructuring Officer ("CRO") shall be appointed by TSL or TAI. The standby engagement with Alderney Management Advisors LLC (Richard Thornberg, Managing Partner) for potential CRO services shall be terminated effective upon the RSA Closing.
Section 16: Tax Considerations
16.1 Overview
The tax treatment of the restructuring transactions contemplated by this Revised Term Sheet will be analyzed in detail in connection with the preparation of the definitive documentation. A preliminary analysis has been prepared by Sylvia Hartwell, specialist tax partner at Calderwood & Harkness LLP. The following is a summary of the key tax considerations that have been identified and that will require further analysis:
(a) Cancellation-of-Debt Income. The mezzanine exchange described in Section 5 results in a debt haircut of approximately 46.6% on $112,300,000 of existing mezzanine notes. TSL may recognize cancellation-of-debt ("COD") income as a result of the exchange. The potential application of Section 108 of the Internal Revenue Code (insolvency exclusion) will be analyzed, including a determination of whether TSL is insolvent within the meaning of Section 108(d)(3) immediately prior to the exchange.
(b) Original Issue discount. The conversion of $75,000,000 of TLA principal to PIK and the capitalization of the $5,400,000 amendment fee may give rise to original issue discount ("OID") that must be accrued and recognized by the Senior Secured Lenders over the life of the modified instruments.
(c) Debt Modification vs. Exchange. The modifications to the Senior Secured Credit Facility described in Section 4 must be analyzed under Treasury Regulation §1.1001-3 to determine whether such modifications constitute a "significant modification" resulting in a deemed exchange of the old debt instruments for new debt instruments for U.S. federal income tax purposes.
(d) Cross-Border Tax Considerations. The restructuring transactions involve parties and entities in both the United States and Greece. Key cross-border considerations include the application of the U.S.-Greece Income Tax Treaty, withholding tax obligations on intercompany interest payments (including the amended intercompany note described in Section 9), and the potential application of the controlled foreign corporation ("CFC") and Subpart F income rules to the restructured capital structure.
(e) KFO Equity Contribution. The tax treatment of the €35,000,000 equity contribution by KFO Holdings must be analyzed under both Greek law and U.S. federal income tax law, including any potential capital gains tax, stamp duty, or other transfer tax implications.
The foregoing is a preliminary summary only and is not intended as tax advice. Each party should consult its own tax advisors with respect to the tax consequences of the restructuring transactions.
Section 17: Comparison to Chapter 11 Alternative
17.1 Summary of Chapter 11 Scenario
In the event the out-of-court restructuring contemplated by this Revised Term Sheet is not consummated, the Company Parties have prepared a contingency plan for a Chapter 11 filing by TAI. TSL, as a Greek société anonyme, would not be a debtor in the Chapter 11 case but might seek recognition under chapter 15 of the U.S. Bankruptcy Code or, alternatively, could commence proceedings under Greek Law 4738/2020. The principal parameters of the Chapter 11 contingency are as follows:
Filing Entity: Thalassa Americas Inc. (TAI) only. TSL would not file for bankruptcy but would cooperate with TAI's Chapter 11 case.
Proposed Venue: United States Bankruptcy Court for the Southern District of Texas (Houston Division).
DIP Financing: A $75,000,000 debtor-in-possession credit facility has been preliminarily committed by Nordbank International AG and Triton Credit Partners LP, on terms including SOFR + 600 basis points, a 0.50% commitment fee, and a 12-month maturity.
Estimated Administrative Costs: Based on KHP's analysis, the estimated professional fees and other administrative costs of a Chapter 11 case for the first 12 months are approximately $18,500,000, including legal, financial advisory, committee counsel, committee financial advisor, U.S. Trustee fees, and other costs.
Estimated Mezzanine Recovery: At the midpoint enterprise value of $610,000,000 estimated by KHP, the recovery to BMC on the Mezzanine Notes in a Chapter 11 scenario is estimated at approximately 62.3%, calculated as ($610,000,000 − $540,000,000) ÷ $112,300,000.
Estimated Unsecured Note Recovery: KHP's waterfall analysis estimates a recovery of between 8% and 14% for holders of the Unsecured Notes in a Chapter 11 scenario, depending on the actual enterprise value realized, the timing of the case, and the amount of administrative claims.
Timeline: Petition through effective date of a plan of reorganization is estimated at approximately 300 days (approximately 10 months).
17.2 Advantages of Out-of-Court Restructuring
The out-of-court restructuring contemplated by this Revised Term Sheet offers significant advantages over a Chapter 11 filing, including:
(a) Cost Savings. Avoidance of approximately $18,500,000 in estimated Chapter 11 administrative costs, which would otherwise reduce value available for distribution to creditors.
(b) Business Preservation. Preservation of ongoing business operations, customer relationships, and counterparty confidence, all of which are critical in the shipping and logistics industry where customers and counterparties routinely reassess their exposure to financially distressed counterparts.
(c) Faster Execution. The out-of-court restructuring is expected to close within approximately 4.5 months from RSA execution (target closing by June 30, 2023), compared to approximately 10 months for a Chapter 11 process.
(d) Reputational Protection. Avoidance of the reputational harm and competitive disruption that inevitably accompanies a public bankruptcy filing in the shipping industry.
(e) Cross-Border Simplicity. Avoidance of the complexity and expense of cross-border insolvency proceedings, including the need for chapter 15 recognition of a Greek proceeding or coordination of parallel proceedings under Greek Law 4738/2020.
(f) Unsecured Noteholder Recovery. Under the out-of-court restructuring, the Unsecured Notes remain fully unimpaired (100% recovery), compared to an estimated recovery of only 8–14% in a Chapter 11 scenario.
(g) Trade Creditor Protection. Trade creditors are paid in full in the ordinary course with no disruption to the supply chain, preserving critical vendor relationships necessary for the continued operation of the fleet and logistics platform.
Section 18: Exclusivity and Confidentiality
18.1 Exclusivity
Upon execution of the acknowledgment pages attached hereto (and continuing upon execution of the definitive RSA), TSL and TAI agree that they shall not, and shall cause their respective affiliates, officers, directors, employees, agents, and advisors not to, directly or indirectly, solicit, initiate, encourage, negotiate, enter into, or consummate any alternative restructuring, recapitalization, refinancing, or similar