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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

FROM: Colette Whitman, Billing Partner, Bankruptcy & Restructuring

TO: Nathaniel Bower, Responsible Partner, Bankruptcy & Restructuring

DATE: October 26, 2022

RE: Staffing Plan and Preliminary Budget Estimate — Thalassa Shipping & Logistics SA / Thalassa Americas Inc. — Matter No. 1044-00003

CLASSIFICATION: Internal — Not for Distribution to Client

I. Purpose and Background

This memorandum sets forth the proposed staffing plan and preliminary budget estimate for the firm's engagement by Thalassa Shipping & Logistics Société Anonyme ("TSL") and its wholly-owned Delaware subsidiary, Thalassa Americas Inc. ("TAI"), pursuant to the engagement letter dated October 25, 2022. The memorandum is prepared for internal planning purposes only and is not intended for distribution to the client or any third party. It reflects the best estimates of the proposed engagement team based on the information available as of the date hereof and is subject to revision as the matter develops.

The engagement encompasses four primary workstreams:

(i) Chapter 11 contingency planning for TAI;

(ii) negotiation and documentation of an out-of-court restructuring;

(iii) tax structuring advice; and

(iv) cross-border coordination with Greek counsel, Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, Athens).

The matter was formally opened on October 25, 2022. A retainer in the amount of $500,000 was requested from the client and is expected to be deposited into the firm's IOLTA account on or about October 28, 2022. Conflicts clearance was completed on October 24, 2022, and the engagement letter was countersigned by Georgios Andreadis, Chief Executive Officer of TSL, on the same date.

Client Context. TSL is a Greek-headquartered private shipping and logistics conglomerate founded in 1987 by the Kostandinos family. The company operates a diversified fleet of approximately 42 vessels (dry-bulk carriers, tankers, and container feeders) and maintains logistics operations in Greece, Turkey, the United Kingdom, the United Arab Emirates, and the United States through various subsidiaries and vessel-owning special purpose vehicles. TAI, TSL's wholly-owned Delaware subsidiary, is the primary operating entity for U.S. logistics, port services, and chartering activities, with its principal office located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010, and approximately 680 U.S.-based employees.

TSL is currently facing a severe liquidity crisis precipitated by the sharp downturn in global freight rates, elevated fuel costs, and the loss of several long-term chartering contracts. Total consolidated debt as of September 30, 2022, is approximately $847.3 million across all facilities, broken down as follows: $685 million under the senior secured credit facility (administrative agent: Nordbank), $112.3 million under the mezzanine facility (Dralvecen Mezzanine Capital LLC), and $50 million in unsecured notes (indenture trustee: Garrison Trust Company). TSL's consolidated revenue declined approximately 30.5% year-over-year, from €1.42 billion in FY2021 to an estimated €987 million in FY2022. TAI's standalone revenue experienced a comparable decline, from $312 million in FY2021 to an estimated $198 million in FY2022, reflecting reduced chartering volumes and the renegotiation of several key contracts at lower rates.

As a result of these financial pressures, the company breached three financial covenants under the $685 million senior secured credit facility as of the September 30, 2022 testing date: the Maximum Net Leverage Ratio, the Minimum Interest Coverage Ratio, and the Minimum Liquidity covenant. The administrative agent, Nordbank (Henrik Lüdemann, Managing Director, Hamburg), declared an event of default on October 3, 2022. A Forbearance Agreement was subsequently negotiated and executed with the lender syndicate on October 10, 2022, providing a 90-day standstill through January 8, 2023. The Forbearance Agreement includes customary milestones, including the retention of legal counsel and a financial advisor, delivery of a 13-week cash flow projection, and commencement of good-faith restructuring negotiations, all of which the company is currently working to satisfy.

Dual-Track Nature of the Engagement. The dual-track nature of this engagement — simultaneous Chapter 11 contingency preparation and out-of-court restructuring negotiation — requires significant front-loading of resources through the first quarter of 2023. The Chapter 11 preparation workstream must proceed in parallel with the out-of-court negotiation workstream so that the client retains the credible ability to file at any time if negotiations fail or the forbearance terminates. This dual-track approach is both strategically critical (as the credibility of the filing threat enhances the client's leverage in out-of-court negotiations) and resource-intensive. The workload is expected to shift toward transaction documentation if an out-of-court deal becomes achievable, or toward litigation and filing-mode preparation if Chapter 11 becomes necessary. Given these dynamics, the staffing plan and budget set forth below reflect the need for sustained and substantial attorney commitments throughout the projected engagement period.

II. Engagement Team — Personnel and Roles

A. Core Team

The following five attorneys are proposed as the core engagement team. This team size is appropriate for the dual-track nature of the engagement and the complexity of the multi-party negotiations involved. Each team member's role, billing rate, and estimated weekly time commitment are set forth below.

1. Nathaniel Bower — Responsible Partner, Bankruptcy & Restructuring

Nathaniel Bower will serve as the Responsible Partner on the matter and will have overall supervisory authority over all four workstreams. His role will include the following:

• Overall matter supervision and strategic direction;

• Lead client relationship management, including direct communications with Georgios Andreadis (CEO, TSL), Dimitrios Kostandinos (Chairman, TSL), and Irini Dalakoura (General Counsel, TSL);

• Lead strategy on creditor negotiations, including the formulation of negotiating positions and the coordination of negotiation sessions with opposing counsel;

• Principal point of contact with opposing counsel, including Graham Whitfield III at Whitfield, Crane & Burgess LLP (counsel to the Ad Hoc Group of Senior Secured Lenders), Theodore Kellner at Kellner & Foss LLP (counsel to Dralvecen Mezzanine Capital LLC), and Carolyn Brightmoor Group at Ashford, Brightmoor Group & McKay PC (counsel to the unsecured noteholders);

• Strategic oversight of cross-border coordination matters;

• Decision-making authority on engagement of CRO designee (Alderney Management Advisors LLC) in consultation with the client;

• Participation in all material negotiations and client presentations.

Nathaniel's billing rate is $1,650 per hour (Partner). His estimated weekly commitment is 15 to 25 hours depending on the phase of the engagement. This commitment will be heavier during periods of active creditor negotiations and in the event of Chapter 11 filing preparation. Nathaniel is expected to be involved across all four workstreams, with the heaviest concentration of his time in Workstreams 1 and 2.

2. Colette Whitman — Billing Partner, Bankruptcy & Restructuring

Colette Whitman will serve as the Billing Partner on the matter and will be responsible for overall billing oversight, budget monitoring, and staffing management. Her role will include the following:

• Billing partner oversight, including review and approval of monthly invoices;

• Budget monitoring and periodic reporting to the Responsible Partner on budget adherence;

• Staffing management, including coordination of additional attorney resources if required;

• Secondary matter supervision, including periodic review of key deliverables;

• Assistance on the out-of-court documentation workstream, particularly review and negotiation of definitive transaction documents;

• Coordination of fee applications and disclosure requirements if Chapter 11 proceeds, including preparation of the §329/2016 disclosure and any fee applications under §330.

Colette's billing rate is $1,650 per hour (Partner). Her estimated weekly commitment is 5 to 10 hours. This commitment is expected to remain relatively stable throughout the engagement, with modest increases during the documentation and closing phase of Workstream 2.

3. Amy Chesterton — Lead Associate, Bankruptcy & Restructuring

Amy Chesterton will serve as the Lead Associate and will bear primary responsibility for day-to-day matter management. Amy is a seventh-year senior associate with substantial experience in restructuring matters, including her recent role as lead associate on the Clearwater Resources restructuring and the Magellan Container Lines Chapter 11 case. Her role on this engagement will include the following:

• Day-to-day matter management and coordination of all work product;

• Primary drafter of all analytical memoranda, pleadings, and transaction documents;

• Coordination with the financial advisor, Kensington Veltrian Partners LLC (James Calloway, Managing Director), on financial analyses, valuation work, and 13-week cash flow projections;

• Coordination with opposing associate counsel, particularly Priya Nandakumar (Senior Associate, Whitfield, Crane & Burgess LLP) on document exchanges, scheduling, and negotiation logistics;

• Management of the closing process for any out-of-court transaction, including oversight of the closing checklist, coordination of legal opinions, and preparation of the funds flow memorandum;

• First-line supervision of Nathan Ikeda's work product;

• Maintenance of matter timeline and milestone tracking.

Amy's billing rate is $1,050 per hour (Senior Associate). Her estimated weekly commitment is 30 to 45 hours. This will be the most intensively staffed position on the engagement. Amy should be relieved of any other significant matter commitments during the projected engagement period, and I recommend that we discuss this with the practice group leader as soon as the staffing plan is approved.

4. Nathan Ikeda — Working Associate, Bankruptcy & Restructuring

Nathan Ikeda will serve as the Working Associate and will provide research, drafting, and analytical support across all four workstreams. Nathan is a fourth-year associate who has demonstrated strong research and drafting skills, including his contributions to the Meridian Energy Partners prepackaged Chapter 11 matter. His role will include the following:

• Legal research and drafting support across all workstreams;

• First-draft responsibility for all analytical memoranda, including the COMI/Chapter 15 analysis, executory contract review, preference and fraudulent transfer exposure analysis, maritime lien and Ship Mortgage Act analysis, critical vendor analysis, D&O fiduciary duty analysis, and comparison of out-of-court versus Chapter 11 outcomes;

• Assistance to Amy Chesterton on drafting and negotiation of transaction documents in Workstream 2;

• Primary coordination point with Vassiliou & Demetriou Law Offices in Athens on Greek cross-border legal research and coordination matters;

• Assistance with DIP credit agreement review and markup;

• Due diligence support, including review of material contracts, fleet documentation, and intercompany arrangements.

Nathan's billing rate is $850 per hour (Associate). His estimated weekly commitment is 35 to 50 hours. Like Amy, Nathan should be substantially dedicated to this matter during the projected engagement period, particularly through Phase 1 and Phase 2.

5. Sylvia Hartwell — Specialist Partner, Tax

Sylvia Hartwell will serve as the lead tax advisor on the engagement and will provide tax advisory services across the engagement pursuant to a supplemental engagement letter that is expected to be executed on or about November 5, 2022. Her role will include the following:

• Cancellation-of-debt income analysis under §108 of the Internal Revenue Code;

• Cross-border tax implications, including analysis under the U.S.-Greece tax treaty, withholding tax considerations on intercompany interest payments, and CFC/Subpart F considerations for TAI as a subsidiary of a Greek parent;

• PIK capitalization treatment analysis;

• Original issue discount analysis under the applicable Treasury Regulations;

• Attribute reduction analysis under §108(b);

• Tax treatment of amendment fees;

• General tax structuring advice on the proposed restructuring transactions.

Sylvia's billing rate is $1,650 per hour (Partner). Her estimated weekly commitment will average 5 to 10 hours but will be concentrated in specific periods when tax deliverables are due. The first significant burst of tax work is anticipated in December 2022, when the initial CODI and cross-border memoranda are expected, and the second burst is anticipated when the specific transaction terms crystallize, likely in March through May 2023.

B. Paralegal Support

One to two paralegals from the Bankruptcy & Restructuring practice group will be assigned to the engagement to provide support in the following areas:

• Document management, including organization and indexing of deal documents, court filings, and correspondence;

• Due diligence coordination, including maintenance of the due diligence request list and tracking of outstanding items;

• Closing checklist preparation and maintenance;

• Cite-checking of all memoranda, pleadings, and legal opinions;

• Assistance with court filings, service, and noticing (if Chapter 11 is filed);

• Coordination with Pendleton Claim Services Inc. on claims and noticing matters.

The paralegal billing rate is $425 per hour. The estimated aggregate weekly commitment for paralegal support is 10 to 20 hours. Specific paralegal assignments will be confirmed upon approval of the staffing plan, and I anticipate drawing from our current pool of experienced bankruptcy paralegals who are familiar with the firm's document management protocols and closing procedures.

C. Additional Resources (As Needed)

At this time, no additional team members beyond the core team and paralegal support described above are being staffed on the engagement. However, the following potential additional resource needs have been identified:

• Additional Junior Associate. If Chapter 11 filing becomes imminent, the preparation of first-day pleadings (including the voluntary petition, approximately eight to ten first-day motions, DIP motions, and the supporting declaration of Marcus Hale) will generate a significant drafting surge. In that event, one additional junior associate from the Bankruptcy & Restructuring group would likely need to be assigned on a temporary basis to assist with pleading preparation, estimated at 80 to 120 hours over a two- to three-week period.

• Litigation Group. If Chapter 11 proceeds and adversary proceedings become necessary — particularly preference actions, fraudulent transfer claims, or substantive consolidation litigation — attorneys from the firm's litigation group would need to be engaged. This would constitute an additional workstream with a separate budget to be prepared at the appropriate time.

• Reallocation Review. No staffing changes are recommended at this time. A reallocation and staffing adequacy review should be conducted at the end of November 2022, after the initial Phase 1 deliverables have been substantially completed and the pace of the engagement is better understood.

III. Workstream Breakdown and Preliminary Budget Estimates

Overview of Budget Methodology

The preliminary budget set forth below is estimated based on anticipated hourly commitments over a projected eight- to nine-month engagement period, commencing in late October 2022 and extending through approximately July 2023. This timeframe assumes the matter reaches either an out-of-court closing or a Chapter 11 filing within that period.

Two scenarios are budgeted:

(A) Out-of-Court Restructuring (RSA Path): TSL and TAI successfully negotiate and execute a Restructuring Support Agreement with all major creditor constituencies, followed by the execution of definitive transaction documents and closing. No Chapter 11 petition is filed.

(B) Chapter 11 Filing (Contingency Path): Out-of-court negotiations fail, the forbearance terminates or is not extended, and TAI files a voluntary Chapter 11 petition. TSL may simultaneously commence parallel proceedings under Greek Law 4738/2020.

Both scenarios share common Phase 1 work (months 1 through 3, approximately October 2022 through January 2023). The scenarios diverge in Phase 2 (months 4 through 9, approximately February 2023 through July 2023). The workstream budgets below reflect the full scope of work anticipated under both shared and divergent phases.

All estimates are presented as ranges to account for the inherent uncertainty in restructuring engagements of this nature. The ranges reflect the best judgment of the billing partner and are informed by comparable recent matters handled by the firm, adjusted for the specific complexity of this engagement, including the cross-border dimension, the number of creditor constituencies, and the dual-track strategy.

Workstream 1: Chapter 11 Contingency Planning

Scope of Work. The Chapter 11 contingency planning workstream encompasses all preparatory work necessary to enable TAI to file a voluntary Chapter 11 petition on short notice if the out-of-court restructuring fails. Even if the filing is never made, this workstream is essential to maintain the credibility of the filing threat and to protect the client's strategic options. The specific deliverables and tasks include:

Analytical Memoranda and Assessments:

• Viability and venue analysis, with the proposed venue being the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, based on TAI's principal office at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. The analysis will address local rules, judge assignment procedures, and any relevant precedent from recent Houston Division cases.

• COMI analysis and Chapter 15 recognition considerations in the event TSL commences proceedings under Greek Law 4738/2020. This analysis will address the center-of-main-interests determination for TSL and each relevant subsidiary, the availability of Chapter 15 recognition, and the interplay between Chapter 15 and a Chapter 11 case filed by TAI.

• Executory contract and unexpired lease analysis for TAI, including identification of all executory contracts and unexpired leases, assessment of assumption/rejection implications, and analysis of applicable cure amounts.

• Preference and fraudulent transfer exposure analysis, with particular focus on the $76.4 million intercompany promissory note from TAI to TSL, which presents potential fraudulent transfer risk under both §548 of the Bankruptcy Code and applicable state law (Texas Uniform Fraudulent Transfer Act). This analysis will also review transfers to insiders during the one-year lookback period and transfers to non-insiders during the 90-day lookback period.

• Intercompany claims and substantive consolidation risk assessment, addressing the treatment of intercompany obligations, the risk that creditors may seek substantive consolidation of TAI with TSL or other affiliates, and the implications for the proposed restructuring.

• D&O liability and fiduciary duty analysis, including zone-of-insolvency issues, the scope of coverage under D&O policy PII-DO-2022-08847 issued by Promontory Indemnity Insurance Co. (aggregate limit: $25 million), and recommendations regarding fiduciary duties of the board in connection with the restructuring.

• Maritime lien and Ship Mortgage Act considerations, including analysis of Olympian Fuel & Supply SA's $9.2 million bunker fuel claim and any other maritime liens that may affect the fleet or TAI's operations.

• Critical vendor and §503(b)(9) analysis, covering TAI's $38.7 million in total trade payables and identifying vendors that may qualify for critical vendor treatment or assert §503(b)(9) claims for goods received within the 20-day period prior to filing.

• Greek cross-border coordination memorandum, prepared in conjunction with Vassiliou & Demetriou, addressing the implications of a simultaneous or sequential filing in Greece under Law 4738/2020 and the coordination mechanisms available under Chapter 15 and applicable protocols.

Chapter 11 Contingency Playbook:

A comprehensive Chapter 11 contingency playbook will be prepared, outlining the proposed timeline and key milestones for a Chapter 11 case:

• Day 1: Filing of voluntary petition and first-day motions; interim hearing

• Day 45: Final DIP approval hearing

• Day 120: Plan support solicitation commences

• Day 180: Filing of Chapter 11 plan and disclosure statement

• Day 270: Confirmation hearing

• Day 300: Effective date and emergence

The playbook will also address proposed professional retentions, governance matters, executory contract strategy, claims administration, and the DIP financing structure.

Draft Pleadings and Filing Documents:

• Draft voluntary petition for TAI (EIN: 84-3291057), including all required schedules and statements of financial affairs in substantially final form.

• Draft corporate ownership statement pursuant to Federal Rule of Bankruptcy Procedure 7007.1, disclosing TSL as the 100% parent of TAI, and disclosing that the Kostandinos family (Dimitrios Kostandinos, 62%, and Elena Kostandinos, 18%, for a combined 80% interest) holds its ownership of TSL indirectly through KFO Holdings SA, a Greek holding company.

• Draft declaration of Marcus Hale, President of TAI, in support of first-day motions, providing a comprehensive overview of the company's business, capital structure, prepetition indebtedness, and the events leading to the filing.

• Full suite of draft first-day motions, including:

• Motion for authority to continue cash management system, bank accounts, and intercompany transactions;

• Motion for authority to pay prepetition employee wages, salaries, benefits, and related obligations for TAI's approximately 680 U.S.-based employees;

• Motion for authority to pay prepetition claims of critical vendors;

• Motion for authority to pay prepetition taxes;

• Motion for authority to continue insurance policies and pay insurance premiums;

• Motion for interim and final authority to obtain post-petition financing (DIP financing in the amount of $75 million from Nordbank and Triton Credit Partners, at a rate of SOFR plus 600 basis points, with a 0.50% commitment fee and a 12-month maturity) and to grant adequate protection to prepetition secured creditors;

• Motion for joint administration (if multiple Thalassa entities file);

• Retention applications for Calderwood & Harkness LLP as debtor's counsel and Kensington Veltrian Partners LLC as financial advisor to the debtor.

• Draft interim and final DIP orders.

DIP Financing:

• Review and markup of the DIP term sheet, which is expected to be received on or about December 15, 2022, from Nordbank and Triton Credit Partners.

• Negotiation of the DIP credit agreement, including review of customary DIP covenants, milestones, carve-outs, and adequate protection provisions.

• DIP budget preparation and adequate protection analysis. The outstanding balance under the senior secured credit facility is approximately $540 million. The fleet was appraised at $623 million by Drakos Maritime Valuations as of November 1, 2022, providing an estimated equity cushion of approximately $83 million for purposes of adequate protection.

Coordination with Standby Professionals:

• Coordinate with Alderney Management Advisors LLC (Richard "Rick" Thornberg, CRO Designee) on the standby CRO engagement. The CRO would be deployed only if Chapter 11 is filed, and the decision to deploy will be made by Nathaniel Bower in consultation with the client's board.

• Coordinate with Pendleton Claim Services Inc. (Laura Pendleton, President) on the standby claims and noticing agent engagement. The engagement letter with Pendleton is expected to be executed on or about November 15, 2022.

Primary Personnel: Amy Chesterton (lead drafter and coordinator), Nathan Ikeda (research and analytical support), Nathaniel Bower (supervision and strategic direction).

Estimated Hours:

Note: This workstream will be heavily front-loaded, with the bulk of the work occurring in November 2022 through January 2023. The analytical memoranda and draft pleadings are expected to be substantially complete by the end of January 2023. If the out-of-court path ultimately succeeds, the draft pleadings and DIP documents will never be filed; however, the investment in this workstream protects the client's strategic leverage in negotiations and ensures the firm is prepared to act swiftly if circumstances change. The DIP financing workstream (review and markup of the DIP term sheet and credit agreement) is expected to extend into February 2023.

Workstream 2: Out-of-Court Restructuring (RSA Negotiation and Documentation)

Scope of Work. This workstream encompasses all legal work associated with the negotiation, documentation, and closing of an out-of-court restructuring through a Restructuring Support Agreement and related definitive documents. This is expected to be the largest workstream by both hours and fees.

Strategic Analysis and Stakeholder Mapping:

• Preparation of an RSA negotiation strategy memorandum and comprehensive stakeholder analysis. The principal creditor constituencies and their current positions, as understood, are as follows:

• Ad Hoc Group of Senior Secured Lenders: Holding approximately $372 million, representing 54.3% of the $685 million senior secured credit facility. The Ad Hoc Group comprises Nordbank ($137 million), Harborstone Bank ($95 million), Triton Credit Partners ($68 million), and Continental Maritime Lending ($72 million). The Ad Hoc Group is represented by Graham Whitfield III at Whitfield, Crane & Burgess LLP, with Draycott Advisory Group LLC (Vanessa Chow, Partner) serving as financial advisor.

• Dralvecen Mezzanine Capital LLC ("BMC"): Holding $112.3 million in mezzanine debt. BMC is represented by Theodore Kellner at Kellner & Foss LLP.

• Unsecured Noteholders: Holding $50 million in unsecured notes, with Garrison Trust Company as indenture trustee. The noteholders are represented by Carolyn Brightmoor Group at Ashford, Brightmoor Group & McKay PC. A scheduled interest payment of $2,062,500 due December 1, 2022 is expected to be missed, triggering a separate event of default under the indenture.

• Trade Creditors: Total trade payables of approximately $38.7 million. No formal committee has been organized at this time.

• Preparation of a detailed comparison of out-of-court versus Chapter 11 outcomes, including estimated administrative cost savings of approximately $18.5 million if a filing is averted, and a recovery analysis utilizing the enterprise value range of $580 million to $640 million prepared by Kensington Veltrian Partners LLC.

Forbearance Agreement Analysis and Extension Negotiations:

• Analysis of the existing Forbearance Agreement (90-day standstill, October 10, 2022 through January 8, 2023), including identification of milestone compliance requirements and potential bases for termination by the lender syndicate.

• Negotiation of forbearance extensions as needed. The current engagement plan anticipates at least one extension (to approximately March 8, 2023) and a possible second extension (to approximately April 7, 2023) to provide sufficient time for RSA negotiation and execution.

RSA Negotiation and Documentation:

• Drafting of the RSA term sheet, including the proposed economic terms for each creditor constituency, and negotiation of the term sheet with all three opposing counsel groups.

• Drafting and negotiation of the definitive Restructuring Support Agreement, including milestones, termination events, fiduciary-out provisions, and representations and warranties.

Transaction Documents Post-RSA Execution:

Upon execution of the RSA, the following definitive transaction documents will need to be drafted, negotiated, and finalized:

• Amendment No. 1 to Senior Secured Credit Agreement. The principal terms of the proposed amendment include: extension of the maturity date to June 15, 2027; conversion of $75 million of the Term Loan A tranche to payment-in-kind ("PIK") interest; reduction of the revolving credit facility commitment from $200 million to $150 million; financial covenant resets, including a Maximum Net Leverage Ratio of 7.00x stepping down to 5.50x by Q4 2025, a Minimum Liquidity covenant of $30 million, and a waiver of the Interest Coverage Ratio covenant through Q4 2023; an amendment fee of 1.00% of the $540 million outstanding balance ($5.4 million), payable in PIK; and a waiver of accrued default interest.

• Amended and Restated Intercreditor Agreement. This agreement will govern the relative priorities of Nordbank as first-lien administrative agent and BMC as second-lien holder, and will address lien subordination, payment waterfall, standstill provisions, and enforcement rights.

• New Second-Lien Note Purchase Agreement and Indenture. BMC's existing $112.3 million mezzanine position will be exchanged for $60 million in new second-lien notes plus a 15% equity interest in the reorganized entity, representing a 46.6% haircut on the debt component. The new notes will bear interest at 10.0% PIK, with a maturity date of June 2028.

• Equity Subscription Agreement. KFO Holdings SA, the Kostandinos family holding company, will execute an equity subscription agreement for a new equity contribution of €35 million (approximately $38.2 million at the prevailing exchange rate of €1.00 = $1.0914).

• Amended and Restated Intercompany Promissory Note. The existing $76.4 million intercompany promissory note from TAI to TSL will be amended and restated to extend the maturity date to December 2028 and to reduce the interest rate from 5.0% to 2.0%.

• Joinder Agreement. A form joinder agreement for consenting lenders to accede to the RSA.

• Consent and Waiver Letter. A consent and waiver letter from Garrison Trust Company in its capacity as indenture trustee, in connection with the missed $2,062,500 unsecured note coupon payment due December 1, 2022.

• Side Letter on Vessel Dispositions. A side letter addressing the planned disposition of six older dry-bulk carriers from the fleet, with estimated aggregate proceeds of approximately $72 million. Net proceeds will be applied to prepay the Term Loan A tranche.

• Lock-Up Agreement with BMC. A lock-up agreement restricting BMC from transferring its claims during the pendency of the restructuring and binding BMC to support the restructuring transactions.

Closing Workstream:

• Preparation and maintenance of a comprehensive closing checklist;

• Preparation of the closing memorandum;

• Legal opinions: (i) due authorization and enforceability opinion, and (ii) no conflicts/no violations opinion, in each case with respect to TAI;

• Secretary's certificate for TAI;

• Officer's certificate executed by Marcus Hale, President of TAI;

• Solvency certificate executed by Diana Restrepo, Chief Financial Officer of TAI;

• Funds flow memorandum.

Primary Personnel: Nathaniel Bower (lead negotiator), Amy Chesterton (lead drafter), Nathan Ikeda (drafting support), Colette Whitman (documentation review).

Estimated Hours:

Note: This workstream will ramp up significantly beginning in January through February 2023, when RSA term sheet drafting commences, and will peak in May through June 2023 during definitive documentation negotiation and closing. If the out-of-court path fails and Chapter 11 is filed, much of this workstream would be replaced by the Chapter 11 plan negotiation and solicitation process. In that event, an additional budget estimate would be prepared to cover the in-court plan process.

Workstream 3: Tax Advisory

Scope of Work. The tax advisory workstream encompasses all tax analysis and structuring advice required in connection with the restructuring, whether consummated out of court or through a Chapter 11 proceeding. The specific deliverables and tasks include:

• Cancellation-of-Debt Income Analysis. Analysis of CODI implications for TAI under §61(a)(12) and the exclusions available under §108 of the Internal Revenue Code, including the insolvency exclusion (§108(a)(1)(B)) and the bankruptcy exclusion (§108(a)(1)(A), applicable only if Chapter 11 is filed). This analysis is particularly critical with respect to the mezzanine exchange (BMC's $112.3 million claim being exchanged for $60 million in new second-lien notes plus a 15% equity interest) and any modification of the senior secured credit facility that results in a deemed exchange or reissuance of the debt.

• Attribute Reduction Analysis. Under §108(b), to the extent CODI is excluded from income, the debtor is required to reduce certain tax attributes (net operating losses, capital loss carryovers, general business credit carryovers, basis in assets, and others) in a prescribed order. This analysis will quantify the required attribute reduction and its impact on TAI's future tax position.

• Cross-Border Tax Implications. Analysis of the U.S.-Greece income tax treaty provisions applicable to the restructuring transactions, including withholding tax on interest payments under the $76.4 million intercompany promissory note, the availability of treaty-reduced withholding rates, and CFC/Subpart F considerations for TAI as a controlled foreign corporation subsidiary of a Greek parent. This analysis will also address the implications of the intercompany note amendment (rate reduction from 5.0% to 2.0%) for transfer pricing purposes.

• Impact of Greek Tax Law. Analysis of the Greek tax implications of KFO Holdings' €35 million equity contribution, including any applicable Greek capital contributions tax, stamp duty, or other transactional taxes, in coordination with Vassiliou & Demetriou.

• OID and Debt Modification/Exchange Analysis. Analysis under Treasury Regulation §1.1001-3 to determine whether the proposed amendment to the senior secured credit facility and the mezzanine exchange constitute significant modifications resulting in deemed exchanges for tax purposes. If a deemed exchange is found, the analysis will address the original issue discount implications for both the existing and newly issued debt instruments.

• Amendment Fee Tax Treatment. Analysis of the tax treatment of the $5.4 million PIK amendment fee payable to the senior secured lenders, including whether the fee is deductible by TAI as a current expense, must be capitalized as a loan origination cost, or constitutes additional OID.

• PIK Capitalization Tax Treatment. Analysis of the tax treatment of the $75 million TLA conversion to PIK interest, including the timing and character of income recognition by the lenders and the corresponding deduction (or capitalization) by TAI.

Primary Personnel: Sylvia Hartwell (lead tax advisor), with coordination from Nathaniel Bower and Amy Chesterton on the integration of tax advice into the overall restructuring strategy and transaction documentation.

Estimated Hours:

Note: Tax work is expected to occur in two primary bursts: (1) the initial analysis phase in December 2022, when the CODI, cross-border, and attribute reduction memoranda are expected to be delivered, and (2) the transaction-specific analysis phase once the RSA terms crystallize, anticipated in March through May 2023, when the debt modification/exchange, amendment fee, and PIK capitalization analyses will be completed and tax provisions will be incorporated into the definitive transaction documents.

Workstream 4: Cross-Border Coordination

Scope of Work. The cross-border coordination workstream encompasses all work required to coordinate with Greek counsel and to address the cross-border legal and regulatory issues arising from the engagement. This workstream is relatively modest in scope on a standalone basis but is critical to the success of the overall restructuring, given that TSL is a Greek-headquartered entity and the bulk of its fleet is held through Greek-registered vessel-owning SPVs.

• Coordination with Greek Counsel. Regular coordination with Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, 15 Vasilissis Sofias Avenue, Athens 10674, Greece) on Greek law insolvency implications, including the application of Greek Law 4738/2020 (the Greek Insolvency Code, as reformed). Nathan Ikeda will serve as the primary point of contact with V&D, with joint calls scheduled as needed on substantive cross-border matters.

• COMI Analysis and Chapter 15 Strategy. Development of a Chapter 15 recognition strategy in the event TSL undertakes Greek insolvency proceedings, including analysis of the likelihood of recognition of Greek proceedings as "foreign main proceedings" and the scope of relief available under §1521.

• Greek Law Requirements for RSA Closing. Review, in coordination with V&D, of the Greek law requirements applicable to the RSA closing, including the equity subscription by KFO Holdings SA, any required regulatory filings with Greek authorities, and confirmation that the RSA transactions do not trigger obligations under Greek Law 4738/2020 (including mandatory filing obligations or avoidance risks).

• Coordination on Collateral and Intercreditor Matters. Coordination on intercreditor and collateral matters involving Greek-flagged vessels and Greek-registered entities, including the 14 vessel-owning SPVs that hold the fleet. This work will address the enforceability of ship mortgages under Greek law, the interplay between Greek maritime law and U.S. Ship Mortgage Act provisions, and the mechanics for release and retaking of ship mortgages in connection with the vessel disposition program.

• Athens General Commercial Registry. Review of Athens General Commercial Registry (GEMI) requirements applicable to any filings or disclosures required in connection with the restructuring transactions.

Primary Personnel: Nathan Ikeda (primary coordinator with V&D), Nathaniel Bower (strategic oversight).

Estimated Hours:

Note: The fees and disbursements of Vassiliou & Demetriou Law Offices are billed directly to TSL and are not included in our budget. The estimates above cover only Calderwood & Harkness time spent coordinating with V&D and addressing cross-border legal issues from a U.S. law perspective.

IV. Consolidated Budget Summary

Scenario A: Out-of-Court RSA Successfully Executed (No Chapter 11 Filing)

The following table consolidates the estimated fees across all four workstreams for the out-of-court restructuring scenario, plus estimated disbursements:

The midpoint estimate for Scenario A is approximately $2,050,000 in combined professional fees and disbursements.

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
FROM: Colette Whitman, Billing Partner, Bankruptcy & Restructuring
TO: Nathaniel Bower, Responsible Partner, Bankruptcy & Restructuring
DATE: October 26, 2022
RE: Staffing Plan and Preliminary Budget Estimate — Thalassa Shipping & Logistics SA / Thalassa Americas Inc. — Matter No. 1044-00003
CLASSIFICATION: Internal — Not for Distribution to Client
I. Purpose and Background
This memorandum sets forth the proposed staffing plan and preliminary budget estimate for the firm's engagement by Thalassa Shipping & Logistics Société Anonyme ("TSL") and its wholly-owned Delaware subsidiary, Thalassa Americas Inc. ("TAI"), pursuant to the engagement letter dated October 25, 2022. The memorandum is prepared for internal planning purposes only and is not intended for distribution to the client or any third party. It reflects the best estimates of the proposed engagement team based on the information available as of the date hereof and is subject to revision as the matter develops.
The engagement encompasses four primary workstreams:
(i) Chapter 11 contingency planning for TAI;
(ii) negotiation and documentation of an out-of-court restructuring;
(iii) tax structuring advice; and
(iv) cross-border coordination with Greek counsel, Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, Athens).
The matter was formally opened on October 25, 2022. A retainer in the amount of $500,000 was requested from the client and is expected to be deposited into the firm's IOLTA account on or about October 28, 2022. Conflicts clearance was completed on October 24, 2022, and the engagement letter was countersigned by Georgios Andreadis, Chief Executive Officer of TSL, on the same date.
Client Context. TSL is a Greek-headquartered private shipping and logistics conglomerate founded in 1987 by the Kostandinos family. The company operates a diversified fleet of approximately 42 vessels (dry-bulk carriers, tankers, and container feeders) and maintains logistics operations in Greece, Turkey, the United Kingdom, the United Arab Emirates, and the United States through various subsidiaries and vessel-owning special purpose vehicles. TAI, TSL's wholly-owned Delaware subsidiary, is the primary operating entity for U.S. logistics, port services, and chartering activities, with its principal office located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010, and approximately 680 U.S.-based employees.
TSL is currently facing a severe liquidity crisis precipitated by the sharp downturn in global freight rates, elevated fuel costs, and the loss of several long-term chartering contracts. Total consolidated debt as of September 30, 2022, is approximately $847.3 million across all facilities, broken down as follows: $685 million under the senior secured credit facility (administrative agent: Nordbank), $112.3 million under the mezzanine facility (Dralvecen Mezzanine Capital LLC), and $50 million in unsecured notes (indenture trustee: Garrison Trust Company). TSL's consolidated revenue declined approximately 30.5% year-over-year, from €1.42 billion in FY2021 to an estimated €987 million in FY2022. TAI's standalone revenue experienced a comparable decline, from $312 million in FY2021 to an estimated $198 million in FY2022, reflecting reduced chartering volumes and the renegotiation of several key contracts at lower rates.
As a result of these financial pressures, the company breached three financial covenants under the $685 million senior secured credit facility as of the September 30, 2022 testing date: the Maximum Net Leverage Ratio, the Minimum Interest Coverage Ratio, and the Minimum Liquidity covenant. The administrative agent, Nordbank (Henrik Lüdemann, Managing Director, Hamburg), declared an event of default on October 3, 2022. A Forbearance Agreement was subsequently negotiated and executed with the lender syndicate on October 10, 2022, providing a 90-day standstill through January 8, 2023. The Forbearance Agreement includes customary milestones, including the retention of legal counsel and a financial advisor, delivery of a 13-week cash flow projection, and commencement of good-faith restructuring negotiations, all of which the company is currently working to satisfy.
Dual-Track Nature of the Engagement. The dual-track nature of this engagement — simultaneous Chapter 11 contingency preparation and out-of-court restructuring negotiation — requires significant front-loading of resources through the first quarter of 2023. The Chapter 11 preparation workstream must proceed in parallel with the out-of-court negotiation workstream so that the client retains the credible ability to file at any time if negotiations fail or the forbearance terminates. This dual-track approach is both strategically critical (as the credibility of the filing threat enhances the client's leverage in out-of-court negotiations) and resource-intensive. The workload is expected to shift toward transaction documentation if an out-of-court deal becomes achievable, or toward litigation and filing-mode preparation if Chapter 11 becomes necessary. Given these dynamics, the staffing plan and budget set forth below reflect the need for sustained and substantial attorney commitments throughout the projected engagement period.
II. Engagement Team — Personnel and Roles
A. Core Team
The following five attorneys are proposed as the core engagement team. This team size is appropriate for the dual-track nature of the engagement and the complexity of the multi-party negotiations involved. Each team member's role, billing rate, and estimated weekly time commitment are set forth below.
1. Nathaniel Bower — Responsible Partner, Bankruptcy & Restructuring
Nathaniel Bower will serve as the Responsible Partner on the matter and will have overall supervisory authority over all four workstreams. His role will include the following:
• Overall matter supervision and strategic direction;
• Lead client relationship management, including direct communications with Georgios Andreadis (CEO, TSL), Dimitrios Kostandinos (Chairman, TSL), and Irini Dalakoura (General Counsel, TSL);
• Lead strategy on creditor negotiations, including the formulation of negotiating positions and the coordination of negotiation sessions with opposing counsel;
• Principal point of contact with opposing counsel, including Graham Whitfield III at Whitfield, Crane & Burgess LLP (counsel to the Ad Hoc Group of Senior Secured Lenders), Theodore Kellner at Kellner & Foss LLP (counsel to Dralvecen Mezzanine Capital LLC), and Carolyn Brightmoor Group at Ashford, Brightmoor Group & McKay PC (counsel to the unsecured noteholders);
• Strategic oversight of cross-border coordination matters;
• Decision-making authority on engagement of CRO designee (Alderney Management Advisors LLC) in consultation with the client;
• Participation in all material negotiations and client presentations.
Nathaniel's billing rate is $1,650 per hour (Partner). His estimated weekly commitment is 15 to 25 hours depending on the phase of the engagement. This commitment will be heavier during periods of active creditor negotiations and in the event of Chapter 11 filing preparation. Nathaniel is expected to be involved across all four workstreams, with the heaviest concentration of his time in Workstreams 1 and 2.
2. Colette Whitman — Billing Partner, Bankruptcy & Restructuring
Colette Whitman will serve as the Billing Partner on the matter and will be responsible for overall billing oversight, budget monitoring, and staffing management. Her role will include the following:
• Billing partner oversight, including review and approval of monthly invoices;
• Budget monitoring and periodic reporting to the Responsible Partner on budget adherence;
• Staffing management, including coordination of additional attorney resources if required;
• Secondary matter supervision, including periodic review of key deliverables;
• Assistance on the out-of-court documentation workstream, particularly review and negotiation of definitive transaction documents;
• Coordination of fee applications and disclosure requirements if Chapter 11 proceeds, including preparation of the §329/2016 disclosure and any fee applications under §330.
Colette's billing rate is $1,650 per hour (Partner). Her estimated weekly commitment is 5 to 10 hours. This commitment is expected to remain relatively stable throughout the engagement, with modest increases during the documentation and closing phase of Workstream 2.
3. Amy Chesterton — Lead Associate, Bankruptcy & Restructuring
Amy Chesterton will serve as the Lead Associate and will bear primary responsibility for day-to-day matter management. Amy is a seventh-year senior associate with substantial experience in restructuring matters, including her recent role as lead associate on the Clearwater Resources restructuring and the Magellan Container Lines Chapter 11 case. Her role on this engagement will include the following:
• Day-to-day matter management and coordination of all work product;
• Primary drafter of all analytical memoranda, pleadings, and transaction documents;
• Coordination with the financial advisor, Kensington Veltrian Partners LLC (James Calloway, Managing Director), on financial analyses, valuation work, and 13-week cash flow projections;
• Coordination with opposing associate counsel, particularly Priya Nandakumar (Senior Associate, Whitfield, Crane & Burgess LLP) on document exchanges, scheduling, and negotiation logistics;
• Management of the closing process for any out-of-court transaction, including oversight of the closing checklist, coordination of legal opinions, and preparation of the funds flow memorandum;
• First-line supervision of Nathan Ikeda's work product;
• Maintenance of matter timeline and milestone tracking.
Amy's billing rate is $1,050 per hour (Senior Associate). Her estimated weekly commitment is 30 to 45 hours. This will be the most intensively staffed position on the engagement. Amy should be relieved of any other significant matter commitments during the projected engagement period, and I recommend that we discuss this with the practice group leader as soon as the staffing plan is approved.
4. Nathan Ikeda — Working Associate, Bankruptcy & Restructuring
Nathan Ikeda will serve as the Working Associate and will provide research, drafting, and analytical support across all four workstreams. Nathan is a fourth-year associate who has demonstrated strong research and drafting skills, including his contributions to the Meridian Energy Partners prepackaged Chapter 11 matter. His role will include the following:
• Legal research and drafting support across all workstreams;
• First-draft responsibility for all analytical memoranda, including the COMI/Chapter 15 analysis, executory contract review, preference and fraudulent transfer exposure analysis, maritime lien and Ship Mortgage Act analysis, critical vendor analysis, D&O fiduciary duty analysis, and comparison of out-of-court versus Chapter 11 outcomes;
• Assistance to Amy Chesterton on drafting and negotiation of transaction documents in Workstream 2;
• Primary coordination point with Vassiliou & Demetriou Law Offices in Athens on Greek cross-border legal research and coordination matters;
• Assistance with DIP credit agreement review and markup;
• Due diligence support, including review of material contracts, fleet documentation, and intercompany arrangements.
Nathan's billing rate is $850 per hour (Associate). His estimated weekly commitment is 35 to 50 hours. Like Amy, Nathan should be substantially dedicated to this matter during the projected engagement period, particularly through Phase 1 and Phase 2.
5. Sylvia Hartwell — Specialist Partner, Tax
Sylvia Hartwell will serve as the lead tax advisor on the engagement and will provide tax advisory services across the engagement pursuant to a supplemental engagement letter that is expected to be executed on or about November 5, 2022. Her role will include the following:
• Cancellation-of-debt income analysis under §108 of the Internal Revenue Code;
• Cross-border tax implications, including analysis under the U.S.-Greece tax treaty, withholding tax considerations on intercompany interest payments, and CFC/Subpart F considerations for TAI as a subsidiary of a Greek parent;
• PIK capitalization treatment analysis;
• Original issue discount analysis under the applicable Treasury Regulations;
• Attribute reduction analysis under §108(b);
• Tax treatment of amendment fees;
• General tax structuring advice on the proposed restructuring transactions.
Sylvia's billing rate is $1,650 per hour (Partner). Her estimated weekly commitment will average 5 to 10 hours but will be concentrated in specific periods when tax deliverables are due. The first significant burst of tax work is anticipated in December 2022, when the initial CODI and cross-border memoranda are expected, and the second burst is anticipated when the specific transaction terms crystallize, likely in March through May 2023.
B. Paralegal Support
One to two paralegals from the Bankruptcy & Restructuring practice group will be assigned to the engagement to provide support in the following areas:
• Document management, including organization and indexing of deal documents, court filings, and correspondence;
• Due diligence coordination, including maintenance of the due diligence request list and tracking of outstanding items;
• Closing checklist preparation and maintenance;
• Cite-checking of all memoranda, pleadings, and legal opinions;
• Assistance with court filings, service, and noticing (if Chapter 11 is filed);
• Coordination with Pendleton Claim Services Inc. on claims and noticing matters.
The paralegal billing rate is $425 per hour. The estimated aggregate weekly commitment for paralegal support is 10 to 20 hours. Specific paralegal assignments will be confirmed upon approval of the staffing plan, and I anticipate drawing from our current pool of experienced bankruptcy paralegals who are familiar with the firm's document management protocols and closing procedures.
C. Additional Resources (As Needed)
At this time, no additional team members beyond the core team and paralegal support described above are being staffed on the engagement. However, the following potential additional resource needs have been identified:
• Additional Junior Associate. If Chapter 11 filing becomes imminent, the preparation of first-day pleadings (including the voluntary petition, approximately eight to ten first-day motions, DIP motions, and the supporting declaration of Marcus Hale) will generate a significant drafting surge. In that event, one additional junior associate from the Bankruptcy & Restructuring group would likely need to be assigned on a temporary basis to assist with pleading preparation, estimated at 80 to 120 hours over a two- to three-week period.
• Litigation Group. If Chapter 11 proceeds and adversary proceedings become necessary — particularly preference actions, fraudulent transfer claims, or substantive consolidation litigation — attorneys from the firm's litigation group would need to be engaged. This would constitute an additional workstream with a separate budget to be prepared at the appropriate time.
• Reallocation Review. No staffing changes are recommended at this time. A reallocation and staffing adequacy review should be conducted at the end of November 2022, after the initial Phase 1 deliverables have been substantially completed and the pace of the engagement is better understood.
III. Workstream Breakdown and Preliminary Budget Estimates
Overview of Budget Methodology
The preliminary budget set forth below is estimated based on anticipated hourly commitments over a projected eight- to nine-month engagement period, commencing in late October 2022 and extending through approximately July 2023. This timeframe assumes the matter reaches either an out-of-court closing or a Chapter 11 filing within that period.
Two scenarios are budgeted:
(A) Out-of-Court Restructuring (RSA Path): TSL and TAI successfully negotiate and execute a Restructuring Support Agreement with all major creditor constituencies, followed by the execution of definitive transaction documents and closing. No Chapter 11 petition is filed.
(B) Chapter 11 Filing (Contingency Path): Out-of-court negotiations fail, the forbearance terminates or is not extended, and TAI files a voluntary Chapter 11 petition. TSL may simultaneously commence parallel proceedings under Greek Law 4738/2020.
Both scenarios share common Phase 1 work (months 1 through 3, approximately October 2022 through January 2023). The scenarios diverge in Phase 2 (months 4 through 9, approximately February 2023 through July 2023). The workstream budgets below reflect the full scope of work anticipated under both shared and divergent phases.
All estimates are presented as ranges to account for the inherent uncertainty in restructuring engagements of this nature. The ranges reflect the best judgment of the billing partner and are informed by comparable recent matters handled by the firm, adjusted for the specific complexity of this engagement, including the cross-border dimension, the number of creditor constituencies, and the dual-track strategy.
Workstream 1: Chapter 11 Contingency Planning
Scope of Work. The Chapter 11 contingency planning workstream encompasses all preparatory work necessary to enable TAI to file a voluntary Chapter 11 petition on short notice if the out-of-court restructuring fails. Even if the filing is never made, this workstream is essential to maintain the credibility of the filing threat and to protect the client's strategic options. The specific deliverables and tasks include:
Analytical Memoranda and Assessments:
• Viability and venue analysis, with the proposed venue being the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, based on TAI's principal office at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. The analysis will address local rules, judge assignment procedures, and any relevant precedent from recent Houston Division cases.
• COMI analysis and Chapter 15 recognition considerations in the event TSL commences proceedings under Greek Law 4738/2020. This analysis will address the center-of-main-interests determination for TSL and each relevant subsidiary, the availability of Chapter 15 recognition, and the interplay between Chapter 15 and a Chapter 11 case filed by TAI.
• Executory contract and unexpired lease analysis for TAI, including identification of all executory contracts and unexpired leases, assessment of assumption/rejection implications, and analysis of applicable cure amounts.
• Preference and fraudulent transfer exposure analysis, with particular focus on the $76.4 million intercompany promissory note from TAI to TSL, which presents potential fraudulent transfer risk under both §548 of the Bankruptcy Code and applicable state law (Texas Uniform Fraudulent Transfer Act). This analysis will also review transfers to insiders during the one-year lookback period and transfers to non-insiders during the 90-day lookback period.
• Intercompany claims and substantive consolidation risk assessment, addressing the treatment of intercompany obligations, the risk that creditors may seek substantive consolidation of TAI with TSL or other affiliates, and the implications for the proposed restructuring.
• D&O liability and fiduciary duty analysis, including zone-of-insolvency issues, the scope of coverage under D&O policy PII-DO-2022-08847 issued by Promontory Indemnity Insurance Co. (aggregate limit: $25 million), and recommendations regarding fiduciary duties of the board in connection with the restructuring.
• Maritime lien and Ship Mortgage Act considerations, including analysis of Olympian Fuel & Supply SA's $9.2 million bunker fuel claim and any other maritime liens that may affect the fleet or TAI's operations.
• Critical vendor and §503(b)(9) analysis, covering TAI's $38.7 million in total trade payables and identifying vendors that may qualify for critical vendor treatment or assert §503(b)(9) claims for goods received within the 20-day period prior to filing.
• Greek cross-border coordination memorandum, prepared in conjunction with Vassiliou & Demetriou, addressing the implications of a simultaneous or sequential filing in Greece under Law 4738/2020 and the coordination mechanisms available under Chapter 15 and applicable protocols.
Chapter 11 Contingency Playbook:
A comprehensive Chapter 11 contingency playbook will be prepared, outlining the proposed timeline and key milestones for a Chapter 11 case:
• Day 1: Filing of voluntary petition and first-day motions; interim hearing
• Day 45: Final DIP approval hearing
• Day 120: Plan support solicitation commences
• Day 180: Filing of Chapter 11 plan and disclosure statement
• Day 270: Confirmation hearing
• Day 300: Effective date and emergence
The playbook will also address proposed professional retentions, governance matters, executory contract strategy, claims administration, and the DIP financing structure.
Draft Pleadings and Filing Documents:
• Draft voluntary petition for TAI (EIN: 84-3291057), including all required schedules and statements of financial affairs in substantially final form.
• Draft corporate ownership statement pursuant to Federal Rule of Bankruptcy Procedure 7007.1, disclosing TSL as the 100% parent of TAI, and disclosing that the Kostandinos family (Dimitrios Kostandinos, 62%, and Elena Kostandinos, 18%, for a combined 80% interest) holds its ownership of TSL indirectly through KFO Holdings SA, a Greek holding company.
• Draft declaration of Marcus Hale, President of TAI, in support of first-day motions, providing a comprehensive overview of the company's business, capital structure, prepetition indebtedness, and the events leading to the filing.
• Full suite of draft first-day motions, including:
• Motion for authority to continue cash management system, bank accounts, and intercompany transactions;
• Motion for authority to pay prepetition employee wages, salaries, benefits, and related obligations for TAI's approximately 680 U.S.-based employees;
• Motion for authority to pay prepetition claims of critical vendors;
• Motion for authority to pay prepetition taxes;
• Motion for authority to continue insurance policies and pay insurance premiums;
• Motion for interim and final authority to obtain post-petition financing (DIP financing in the amount of $75 million from Nordbank and Triton Credit Partners, at a rate of SOFR plus 600 basis points, with a 0.50% commitment fee and a 12-month maturity) and to grant adequate protection to prepetition secured creditors;
• Motion for joint administration (if multiple Thalassa entities file);
• Retention applications for Calderwood & Harkness LLP as debtor's counsel and Kensington Veltrian Partners LLC as financial advisor to the debtor.
• Draft interim and final DIP orders.
DIP Financing:
• Review and markup of the DIP term sheet, which is expected to be received on or about December 15, 2022, from Nordbank and Triton Credit Partners.
• Negotiation of the DIP credit agreement, including review of customary DIP covenants, milestones, carve-outs, and adequate protection provisions.
• DIP budget preparation and adequate protection analysis. The outstanding balance under the senior secured credit facility is approximately $540 million. The fleet was appraised at $623 million by Drakos Maritime Valuations as of November 1, 2022, providing an estimated equity cushion of approximately $83 million for purposes of adequate protection.
Coordination with Standby Professionals:
• Coordinate with Alderney Management Advisors LLC (Richard "Rick" Thornberg, CRO Designee) on the standby CRO engagement. The CRO would be deployed only if Chapter 11 is filed, and the decision to deploy will be made by Nathaniel Bower in consultation with the client's board.
• Coordinate with Pendleton Claim Services Inc. (Laura Pendleton, President) on the standby claims and noticing agent engagement. The engagement letter with Pendleton is expected to be executed on or about November 15, 2022.
Primary Personnel: Amy Chesterton (lead drafter and coordinator), Nathan Ikeda (research and analytical support), Nathaniel Bower (supervision and strategic direction).
Estimated Hours:
Note: This workstream will be heavily front-loaded, with the bulk of the work occurring in November 2022 through January 2023. The analytical memoranda and draft pleadings are expected to be substantially complete by the end of January 2023. If the out-of-court path ultimately succeeds, the draft pleadings and DIP documents will never be filed; however, the investment in this workstream protects the client's strategic leverage in negotiations and ensures the firm is prepared to act swiftly if circumstances change. The DIP financing workstream (review and markup of the DIP term sheet and credit agreement) is expected to extend into February 2023.
Workstream 2: Out-of-Court Restructuring (RSA Negotiation and Documentation)
Scope of Work. This workstream encompasses all legal work associated with the negotiation, documentation, and closing of an out-of-court restructuring through a Restructuring Support Agreement and related definitive documents. This is expected to be the largest workstream by both hours and fees.
Strategic Analysis and Stakeholder Mapping:
• Preparation of an RSA negotiation strategy memorandum and comprehensive stakeholder analysis. The principal creditor constituencies and their current positions, as understood, are as follows:
• Ad Hoc Group of Senior Secured Lenders: Holding approximately $372 million, representing 54.3% of the $685 million senior secured credit facility. The Ad Hoc Group comprises Nordbank ($137 million), Harborstone Bank ($95 million), Triton Credit Partners ($68 million), and Continental Maritime Lending ($72 million). The Ad Hoc Group is represented by Graham Whitfield III at Whitfield, Crane & Burgess LLP, with Draycott Advisory Group LLC (Vanessa Chow, Partner) serving as financial advisor.
• Dralvecen Mezzanine Capital LLC ("BMC"): Holding $112.3 million in mezzanine debt. BMC is represented by Theodore Kellner at Kellner & Foss LLP.
• Unsecured Noteholders: Holding $50 million in unsecured notes, with Garrison Trust Company as indenture trustee. The noteholders are represented by Carolyn Brightmoor Group at Ashford, Brightmoor Group & McKay PC. A scheduled interest payment of $2,062,500 due December 1, 2022 is expected to be missed, triggering a separate event of default under the indenture.
• Trade Creditors: Total trade payables of approximately $38.7 million. No formal committee has been organized at this time.
• Preparation of a detailed comparison of out-of-court versus Chapter 11 outcomes, including estimated administrative cost savings of approximately $18.5 million if a filing is averted, and a recovery analysis utilizing the enterprise value range of $580 million to $640 million prepared by Kensington Veltrian Partners LLC.
Forbearance Agreement Analysis and Extension Negotiations:
• Analysis of the existing Forbearance Agreement (90-day standstill, October 10, 2022 through January 8, 2023), including identification of milestone compliance requirements and potential bases for termination by the lender syndicate.
• Negotiation of forbearance extensions as needed. The current engagement plan anticipates at least one extension (to approximately March 8, 2023) and a possible second extension (to approximately April 7, 2023) to provide sufficient time for RSA negotiation and execution.
RSA Negotiation and Documentation:
• Drafting of the RSA term sheet, including the proposed economic terms for each creditor constituency, and negotiation of the term sheet with all three opposing counsel groups.
• Drafting and negotiation of the definitive Restructuring Support Agreement, including milestones, termination events, fiduciary-out provisions, and representations and warranties.
Transaction Documents Post-RSA Execution:
Upon execution of the RSA, the following definitive transaction documents will need to be drafted, negotiated, and finalized:
• Amendment No. 1 to Senior Secured Credit Agreement. The principal terms of the proposed amendment include: extension of the maturity date to June 15, 2027; conversion of $75 million of the Term Loan A tranche to payment-in-kind ("PIK") interest; reduction of the revolving credit facility commitment from $200 million to $150 million; financial covenant resets, including a Maximum Net Leverage Ratio of 7.00x stepping down to 5.50x by Q4 2025, a Minimum Liquidity covenant of $30 million, and a waiver of the Interest Coverage Ratio covenant through Q4 2023; an amendment fee of 1.00% of the $540 million outstanding balance ($5.4 million), payable in PIK; and a waiver of accrued default interest.
• Amended and Restated Intercreditor Agreement. This agreement will govern the relative priorities of Nordbank as first-lien administrative agent and BMC as second-lien holder, and will address lien subordination, payment waterfall, standstill provisions, and enforcement rights.
• New Second-Lien Note Purchase Agreement and Indenture. BMC's existing $112.3 million mezzanine position will be exchanged for $60 million in new second-lien notes plus a 15% equity interest in the reorganized entity, representing a 46.6% haircut on the debt component. The new notes will bear interest at 10.0% PIK, with a maturity date of June 2028.
• Equity Subscription Agreement. KFO Holdings SA, the Kostandinos family holding company, will execute an equity subscription agreement for a new equity contribution of €35 million (approximately $38.2 million at the prevailing exchange rate of €1.00 = $1.0914).
• Amended and Restated Intercompany Promissory Note. The existing $76.4 million intercompany promissory note from TAI to TSL will be amended and restated to extend the maturity date to December 2028 and to reduce the interest rate from 5.0% to 2.0%.
• Joinder Agreement. A form joinder agreement for consenting lenders to accede to the RSA.
• Consent and Waiver Letter. A consent and waiver letter from Garrison Trust Company in its capacity as indenture trustee, in connection with the missed $2,062,500 unsecured note coupon payment due December 1, 2022.
• Side Letter on Vessel Dispositions. A side letter addressing the planned disposition of six older dry-bulk carriers from the fleet, with estimated aggregate proceeds of approximately $72 million. Net proceeds will be applied to prepay the Term Loan A tranche.
• Lock-Up Agreement with BMC. A lock-up agreement restricting BMC from transferring its claims during the pendency of the restructuring and binding BMC to support the restructuring transactions.
Closing Workstream:
• Preparation and maintenance of a comprehensive closing checklist;
• Preparation of the closing memorandum;
• Legal opinions: (i) due authorization and enforceability opinion, and (ii) no conflicts/no violations opinion, in each case with respect to TAI;
• Secretary's certificate for TAI;
• Officer's certificate executed by Marcus Hale, President of TAI;
• Solvency certificate executed by Diana Restrepo, Chief Financial Officer of TAI;
• Funds flow memorandum.
Primary Personnel: Nathaniel Bower (lead negotiator), Amy Chesterton (lead drafter), Nathan Ikeda (drafting support), Colette Whitman (documentation review).
Estimated Hours:
Note: This workstream will ramp up significantly beginning in January through February 2023, when RSA term sheet drafting commences, and will peak in May through June 2023 during definitive documentation negotiation and closing. If the out-of-court path fails and Chapter 11 is filed, much of this workstream would be replaced by the Chapter 11 plan negotiation and solicitation process. In that event, an additional budget estimate would be prepared to cover the in-court plan process.
Workstream 3: Tax Advisory
Scope of Work. The tax advisory workstream encompasses all tax analysis and structuring advice required in connection with the restructuring, whether consummated out of court or through a Chapter 11 proceeding. The specific deliverables and tasks include:
• Cancellation-of-Debt Income Analysis. Analysis of CODI implications for TAI under §61(a)(12) and the exclusions available under §108 of the Internal Revenue Code, including the insolvency exclusion (§108(a)(1)(B)) and the bankruptcy exclusion (§108(a)(1)(A), applicable only if Chapter 11 is filed). This analysis is particularly critical with respect to the mezzanine exchange (BMC's $112.3 million claim being exchanged for $60 million in new second-lien notes plus a 15% equity interest) and any modification of the senior secured credit facility that results in a deemed exchange or reissuance of the debt.
• Attribute Reduction Analysis. Under §108(b), to the extent CODI is excluded from income, the debtor is required to reduce certain tax attributes (net operating losses, capital loss carryovers, general business credit carryovers, basis in assets, and others) in a prescribed order. This analysis will quantify the required attribute reduction and its impact on TAI's future tax position.
• Cross-Border Tax Implications. Analysis of the U.S.-Greece income tax treaty provisions applicable to the restructuring transactions, including withholding tax on interest payments under the $76.4 million intercompany promissory note, the availability of treaty-reduced withholding rates, and CFC/Subpart F considerations for TAI as a controlled foreign corporation subsidiary of a Greek parent. This analysis will also address the implications of the intercompany note amendment (rate reduction from 5.0% to 2.0%) for transfer pricing purposes.
• Impact of Greek Tax Law. Analysis of the Greek tax implications of KFO Holdings' €35 million equity contribution, including any applicable Greek capital contributions tax, stamp duty, or other transactional taxes, in coordination with Vassiliou & Demetriou.
• OID and Debt Modification/Exchange Analysis. Analysis under Treasury Regulation §1.1001-3 to determine whether the proposed amendment to the senior secured credit facility and the mezzanine exchange constitute significant modifications resulting in deemed exchanges for tax purposes. If a deemed exchange is found, the analysis will address the original issue discount implications for both the existing and newly issued debt instruments.
• Amendment Fee Tax Treatment. Analysis of the tax treatment of the $5.4 million PIK amendment fee payable to the senior secured lenders, including whether the fee is deductible by TAI as a current expense, must be capitalized as a loan origination cost, or constitutes additional OID.
• PIK Capitalization Tax Treatment. Analysis of the tax treatment of the $75 million TLA conversion to PIK interest, including the timing and character of income recognition by the lenders and the corresponding deduction (or capitalization) by TAI.
Primary Personnel: Sylvia Hartwell (lead tax advisor), with coordination from Nathaniel Bower and Amy Chesterton on the integration of tax advice into the overall restructuring strategy and transaction documentation.
Estimated Hours:
Note: Tax work is expected to occur in two primary bursts: (1) the initial analysis phase in December 2022, when the CODI, cross-border, and attribute reduction memoranda are expected to be delivered, and (2) the transaction-specific analysis phase once the RSA terms crystallize, anticipated in March through May 2023, when the debt modification/exchange, amendment fee, and PIK capitalization analyses will be completed and tax provisions will be incorporated into the definitive transaction documents.
Workstream 4: Cross-Border Coordination
Scope of Work. The cross-border coordination workstream encompasses all work required to coordinate with Greek counsel and to address the cross-border legal and regulatory issues arising from the engagement. This workstream is relatively modest in scope on a standalone basis but is critical to the success of the overall restructuring, given that TSL is a Greek-headquartered entity and the bulk of its fleet is held through Greek-registered vessel-owning SPVs.
• Coordination with Greek Counsel. Regular coordination with Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, 15 Vasilissis Sofias Avenue, Athens 10674, Greece) on Greek law insolvency implications, including the application of Greek Law 4738/2020 (the Greek Insolvency Code, as reformed). Nathan Ikeda will serve as the primary point of contact with V&D, with joint calls scheduled as needed on substantive cross-border matters.
• COMI Analysis and Chapter 15 Strategy. Development of a Chapter 15 recognition strategy in the event TSL undertakes Greek insolvency proceedings, including analysis of the likelihood of recognition of Greek proceedings as "foreign main proceedings" and the scope of relief available under §1521.
• Greek Law Requirements for RSA Closing. Review, in coordination with V&D, of the Greek law requirements applicable to the RSA closing, including the equity subscription by KFO Holdings SA, any required regulatory filings with Greek authorities, and confirmation that the RSA transactions do not trigger obligations under Greek Law 4738/2020 (including mandatory filing obligations or avoidance risks).
• Coordination on Collateral and Intercreditor Matters. Coordination on intercreditor and collateral matters involving Greek-flagged vessels and Greek-registered entities, including the 14 vessel-owning SPVs that hold the fleet. This work will address the enforceability of ship mortgages under Greek law, the interplay between Greek maritime law and U.S. Ship Mortgage Act provisions, and the mechanics for release and retaking of ship mortgages in connection with the vessel disposition program.
• Athens General Commercial Registry. Review of Athens General Commercial Registry (GEMI) requirements applicable to any filings or disclosures required in connection with the restructuring transactions.
Primary Personnel: Nathan Ikeda (primary coordinator with V&D), Nathaniel Bower (strategic oversight).
Estimated Hours:
Note: The fees and disbursements of Vassiliou & Demetriou Law Offices are billed directly to TSL and are not included in our budget. The estimates above cover only Calderwood & Harkness time spent coordinating with V&D and addressing cross-border legal issues from a U.S. law perspective.
IV. Consolidated Budget Summary
Scenario A: Out-of-Court RSA Successfully Executed (No Chapter 11 Filing)
The following table consolidates the estimated fees across all four workstreams for the out-of-court restructuring scenario, plus estimated disbursements:
The midpoint estimate for Scenario A is approximately $2,050,000 in combined professional fees and disbursements.
Actual billing may vary significantly from the estimates set forth above depending on a number of factors, including the pace and complexity of negotiations with the Ad Hoc Group, BMC, and the unsecured noteholder group; the number and duration of forbearance extension negotiations; the extent to which the parties are able to reach consensus on the RSA term sheet without protracted negotiation; and any need for emergency motions or accelerated filing preparation. To the extent any of these risk factors materialize, fees could exceed the high estimate.
Scenario B: Chapter 11 Filing by TAI (If Out-of-Court Fails)
If the out-of-court restructuring is not achievable and Chapter 11 becomes necessary, the budget profile would change materially. Specifically:
• Workstream 1 costs would increase substantially to cover the actual filing, first-day hearings, DIP approval, monthly operating reports, the plan process (plan negotiation, disclosure statement, solicitation, confirmation hearing), and post-confirmation matters.
• Workstream 2 would be largely replaced by plan negotiation and solicitation costs, which are typically more intensive and prolonged than an out-of-court documentation process.
• Estimated additional professional fees for the first 12 months of a Chapter 11 case: $2,500,000 to $4,000,000 (Calderwood & Harkness fees only, excluding fees of Kensington Veltrian Partners, Alderney Management Advisors, Pendleton Claim Services, and any other court-approved professionals).
• Total estimated Calderwood & Harkness fees in a Chapter 11 scenario: $4,000,000 to $6,000,000 or more, depending on the complexity of the case, the duration of the plan process, and the extent of contested matters and adversary proceedings.
• All professional fees in a Chapter 11 case would be subject to U.S. Trustee review and Bankruptcy Court approval under §330 of the Bankruptcy Code, and the firm would be required to submit detailed fee applications on a periodic basis.
A detailed Chapter 11 budget will be prepared if and when the filing decision is made.
Retainer and Billing Arrangements
The following billing arrangements are in effect pursuant to the engagement letter dated October 25, 2022:
• Retainer. A retainer in the amount of $500,000 is to be deposited by the client on or about October 28, 2022, into Calderwood & Harkness's IOLTA account. The retainer will be held as security for the client's payment obligations and will be applied to the final invoice upon the conclusion of the engagement or upon the matter being placed in dormancy status.
• Billing Cycle. Monthly billing. Invoices will be prepared and delivered to the client within 15 business days following the end of each calendar month. Payment is due within 30 days of the date of invoice.
• Billing Rates. Billing rates are as set forth in the engagement letter:
• Partners: $1,650 per hour
• Senior Associates: $1,050 per hour
• Associates: $850 per hour
• Paralegals: $425 per hour
• Rate Adjustments. The firm's standard annual rate increase takes effect on January 1 of each year. Any rate increase effective January 1, 2023 would be communicated to the client in advance and applied to time recorded on or after the effective date. For purposes of this budget estimate, current rates have been used throughout.
V. Phased Timeline and Milestones
The following phased timeline sets forth the anticipated sequence of work, key milestones, and estimated fee allocation by phase. This timeline is subject to adjustment based on the actual pace of negotiations and developments in the matter.
Phase 1: Initial Assessment and Chapter 11 Preparation (October – December 2022)
Weeks 1–2 (Late October 2022):
• Engagement opening, including execution of engagement letter and retainer deposit;
• Conflicts clearance (completed October 24, 2022);
• Initial document collection, including the $685 million senior secured credit agreement, the intercreditor agreement, the forbearance agreement, the mezzanine facility agreement, the unsecured note indenture, intercompany agreements, and corporate organizational documents;
• Introductory communications and scheduling of initial calls with Nordbank (Henrik Lüdemann, Managing Director), the financial advisor Kensington Veltrian Partners LLC (James Calloway, Managing Director), and Greek counsel Vassiliou & Demetriou (Alexandros Vassiliou, Lead Partner);
• Establishment of secure data room and internal document management protocols.
Weeks 3–4 (Early to Mid-November 2022):
• Preparation and delivery of preliminary Chapter 11 viability and venue analysis memorandum;
• Preparation and delivery of COMI and Chapter 15 analysis memorandum;
• Review of the Drakos Maritime Valuations fleet appraisal ($623 million as of November 1, 2022, reflecting a decline from $891 million as of January 2022) and preparation of an internal summary of appraisal results and their implications for adequate protection, DIP collateral, and recovery analysis;
• Execution of the standby engagement letter with Pendleton Claim Services Inc. (target: November 15, 2022);
• Initial coordination call with Vassiliou & Demetriou on Greek law insolvency framework.
Weeks 5–8 (Late November through December 2022):
• Preparation and delivery of executory contract and unexpired lease analysis;
• Preparation and delivery of preference and fraudulent transfer exposure memorandum (including the $76.4 million intercompany note analysis);
• Preparation and delivery of intercompany claims and substantive consolidation risk memorandum;
• Preparation and delivery of D&O liability and fiduciary duty memorandum (zone of insolvency analysis);
• Preparation and delivery of initial tax memoranda: CODI and §108 analysis, cross-border tax analysis (U.S.-Greece treaty, Subpart F/CFC considerations);
• Preparation and delivery of maritime lien memorandum (including Olympian Fuel & Supply SA's $9.2 million bunker fuel claim);
• Review of DIP term sheet (expected receipt: December 15, 2022, from Nordbank and Triton Credit Partners);
• Preparation and delivery of forbearance agreement analysis memorandum;
• Execution of supplemental engagement letter for tax advisory scope (Sylvia Hartwell; target: November 5, 2022).
Estimated Phase 1 Fees: $500,000 – $750,000
Phase 2: Chapter 11 Playbook and RSA Negotiations (January – March 2023)
Weeks 9–12 (January 2023):
• Preparation and delivery of critical vendor and §503(b)(9) analysis;
• Completion of the comprehensive Chapter 11 contingency playbook;
• Preparation and delivery of the Greek Law 4738/2020 cross-border coordination memorandum (with input from V&D);
• Drafting of the full suite of Chapter 11 pleadings, including voluntary petition, first-day motions, DIP motions, and retention applications;
• DIP credit agreement review and markup;
• Negotiation of the first forbearance extension (current forbearance expires January 8, 2023; target: extension to March 8, 2023);
• Coordination with Alderney Management Advisors on CRO standby engagement status.
Weeks 13–16 (February 2023):
• Preparation and delivery of RSA negotiation strategy memorandum and stakeholder analysis;
• Initial RSA term sheet draft (target: February 3, 2023, for internal review);
• Commence negotiations with Ad Hoc Group counsel (Whitfield, Crane & Burgess LLP), BMC counsel (Kellner & Foss LLP), and unsecured noteholder counsel (Ashford, Brightmoor Group & McKay PC);
• Revised RSA term sheet (target: February 10, 2023, for circulation to all creditor groups);
• Preparation and delivery of the comparison memorandum (out-of-court restructuring versus Chapter 11 outcomes), incorporating KHP valuation analysis.
Weeks 17–20 (March 2023):
• Definitive RSA negotiation and execution (target: March 14, 2023);
• Negotiation of the second forbearance extension (current extended forbearance expires March 8, 2023; target: extension to April 7, 2023);
• Execution of joinder agreements by consenting lenders;
• Execution of lock-up agreement with BMC;
• Negotiation and execution of consent and waiver letter from Garrison Trust Company.
Estimated Phase 2 Fees: $600,000 – $900,000
Phase 3: Transaction Documentation and Closing (April – June 2023)
Weeks 21–28 (April through May 2023):
• Drafting and negotiation of all definitive transaction documents:
• Amendment No. 1 to Senior Secured Credit Agreement;
• Amended and Restated Intercreditor Agreement;
• New Second-Lien Note Purchase Agreement and Indenture;
• Equity Subscription Agreement (KFO Holdings SA);
• Amended and Restated Intercompany Promissory Note (TAI → TSL);
• Side Letter on vessel dispositions;
• Preparation of transaction-specific tax memoranda: amendment fee and PIK treatment analysis, debt modification/exchange analysis under Treas. Reg. §1.1001-3, OID analysis;
• Coordination with Vassiliou & Demetriou on Greek law closing requirements (equity subscription, GEMI filings, regulatory confirmations);
• Coordination with Kensington Veltrian Partners on updated financial analyses and closing conditions.
Weeks 29–32 (June 2023):
• Finalization of all definitive transaction documents;
• Preparation and finalization of the closing checklist;
• Preparation and delivery of legal opinions (due authorization/enforceability; no conflicts/no violations) with respect to TAI;
• Preparation of secretary's certificate for TAI;
• Preparation of officer's certificate (Marcus Hale, President, TAI);
• Preparation of solvency certificate (Diana Restrepo, CFO, TAI);
• Preparation of funds flow memorandum;
• Closing: target date June 30, 2023.
Estimated Phase 3 Fees: $450,000 – $650,000
Phase 4: Post-Closing / Dormancy (July 2023)
• File organization and internal closing of the matter;
• Preparation and issuance of final invoice;
• Termination of the Pendleton Claim Services standby engagement;
• Notification to Alderney Management Advisors of CRO standby termination;
• Matter dormancy designation (target: July 15, 2023);
• Application of retainer balance to final invoice or refund of unused retainer.
Estimated Phase 4 Fees: $25,000 – $50,000
VI. Coordination with Other Professionals
The restructuring of TSL and TAI involves a number of other professional advisors whose work will need to be coordinated with our own. The following provides a summary of each advisor, their role, and the nature of the coordination required.
Kensington Veltrian Partners LLC
James Calloway, Managing Director 300 Park Avenue, 12th Floor, New York, NY 10022
Role: Financial advisor to TSL and TAI. Kensington Veltrian Partners is responsible for preparing 13-week cash flow models, enterprise valuation analysis (current estimated range: $580 million to $640 million), recovery waterfall analysis, and other financial analyses supporting the restructuring. KHP's fee arrangement with the client consists of a monthly advisory fee of $250,000, plus a completion fee of $4.5 million upon execution of an RSA or closing of an out-of-court restructuring, or a filing fee of $2.0 million upon the filing of a Chapter 11 petition (with crediting against the completion fee if both events occur). Calderwood & Harkness will coordinate closely with KHP on negotiation strategy, financial analysis supporting creditor proposals, DIP budgeting, and the preparation of adequate protection packages.
Alderney Management Advisors LLC
Richard "Rick" Thornberg, CRO Designee 200 Clarendon Street, 45th Floor, Boston, MA 02116
Role: Engaged on standby to provide Chief Restructuring Officer services to TAI in the event a Chapter 11 petition is filed. Alderney has been selected based on Rick Thornberg's extensive experience in maritime and logistics restructurings. Calderwood & Harkness will maintain periodic contact with Alderney and provide updates on the status of the engagement. The decision to formally deploy the CRO will be made by Nathaniel Bower in consultation with the client's board of directors if and when a Chapter 11 filing becomes imminent.
Vassiliou & Demetriou Law Offices
Alexandros Vassiliou, Lead Partner 15 Vasilissis Sofias Avenue, Athens 10674, Greece
Role: Greek counsel to TSL. Vassiliou & Demetriou provides advice on Greek insolvency law (Law 4738/2020), corporate governance matters under Greek law, regulatory filings, and collateral and intercreditor matters involving Greek-flagged vessels and Greek-registered entities. Nathan Ikeda will serve as the primary coordination contact, with joint calls scheduled as needed on substantive cross-border matters. Vassiliou & Demetriou's fees and disbursements are billed directly to TSL and are not included in our budget.
Draycott Advisory Group LLC
Vanessa Chow, Partner 520 Madison Avenue, 20th Floor, New York, NY 10022
Role: Financial advisor to the Ad Hoc Group of Senior Secured Lenders. Draycott is preparing its own valuation analysis and recovery waterfall on behalf of the Ad Hoc Group. Calderwood & Harkness will coordinate with Draycott indirectly through Whitfield, Crane & Burgess LLP and directly on information requests, data room access, and the exchange of financial models and supporting documentation. Maintaining a constructive working relationship with Draycott will be important to the pace of negotiations.
Drakos Maritime Valuations Ltd.
Captain Nikos Drakos 28 Poseidonos Avenue, Piraeus 18531, Greece
Role: Independent fleet appraiser. Drakos prepared the November 1, 2022 fleet appraisal valuing the Thalassa fleet at $623 million, a decline from the prior appraisal of $891 million in January 2022. This appraisal will serve as the basis for adequate protection analysis, DIP collateral evaluation, and the recovery analysis underpinning the RSA negotiations. Calderwood & Harkness may need to coordinate with Drakos on updated appraisals if vessel values continue to decline or if vessel dispositions alter the fleet composition.
Grainger, Holt & Associates LLP
Malcolm Holt, Lead Engagement Partner 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom
Role: Independent auditors of TSL. Calderwood & Harkness may need to coordinate with Grainger, Holt on access to historical financial statements, audit work papers, and any going-concern qualifications or audit opinions relevant to the restructuring. In the event of a Chapter 11 filing, coordination with the auditors would intensify in connection with the preparation of monthly operating reports and the disclosure statement.
Pendleton Claim Services Inc.
Laura Pendleton, President 1601 Elm Street, Suite 4200, Dallas, TX 75201
Role: Standby claims and noticing agent. Pendleton will be engaged to serve as the claims and noticing agent in the event of a Chapter 11 filing by TAI. The engagement letter is expected to be executed on or about November 15, 2022. Pendleton will maintain a state of readiness to establish claims administration and noticing infrastructure on short notice. Calderwood & Harkness will coordinate with Pendleton on the preparation of the creditor matrix, mailing lists, and noticing protocols. In the event the out-of-court restructuring succeeds and no filing occurs, the Pendleton engagement will be terminated during Phase 4.
VII. Risk Factors and Budget Contingencies
The preliminary budget set forth in this memorandum is subject to a number of material risk factors that could cause actual fees to deviate significantly from the estimates. The following risk factors have been identified and should be taken into account when evaluating the budget:
Forbearance Termination Risk. The existing Forbearance Agreement expires on January 8, 2023. If the lender syndicate declines to extend the forbearance, or if the forbearance is terminated early due to a milestone default or other triggering event, the client could face an immediate need for emergency Chapter 11 filing preparation. In such a scenario, the team would need to shift from a measured dual-track approach to an accelerated filing-mode posture, significantly increasing Workstream 1 costs. Emergency filing preparation typically requires around-the-clock drafting over a compressed period of one to two weeks, with corresponding increases in attorney hours.
Multi-Entity Filing. The current engagement scope contemplates a Chapter 11 filing by TAI only. However, if additional Thalassa entities — particularly any of the 14 vessel-owning SPVs — need to file alongside TAI in order to address intercompany issues, gain access to the automatic stay, or facilitate a comprehensive restructuring, the drafting workload would increase materially. Each additional filing entity would require a separate voluntary petition, schedules, and statement of financial affairs, as well as analysis of entity-specific issues. In such a scenario, an additional associate would likely need to be staffed on the matter.
Contested DIP Financing. The proposed DIP financing from Nordbank and Triton Credit Partners has been discussed in preliminary terms, but the definitive terms have not yet been finalized. If Dralvecen Mezzanine Capital LLC or other parties-in-interest (including the unsecured noteholders or the U.S. Trustee) contest the DIP financing terms — including the priming of BMC's second-lien position, the adequate protection package, or the proposed milestones — the resulting litigation would generate additional fees not reflected in the current budget. Contested DIP proceedings can be time-intensive and often involve evidentiary hearings.
Protracted Negotiations. The current timeline assumes that RSA negotiations with the four principal creditor constituencies (the Ad Hoc Group, BMC, the unsecured noteholders, and trade creditors) can be substantially concluded within the projected timeframe. However, multi-party restructuring negotiations frequently take longer than anticipated due to divergent economic interests, intercreditor disputes, valuation disagreements, and the mechanics of building consensus across multiple groups. If negotiations extend beyond the projected timeline, the engagement period and corresponding fees would increase.
Greek Proceedings. If TSL commences parallel insolvency proceedings under Greek Law 4738/2020, a Chapter 15 petition and recognition proceeding in the United States would constitute an additional workstream not fully budgeted above. A Chapter 15 proceeding would require the preparation and filing of a recognition petition, supporting declarations, and potentially contested proceedings over the scope of recognition relief. This would add an estimated $100,000 to $250,000 in additional Calderwood & Harkness fees, depending on the complexity and any opposition.
Market Conditions. The shipping industry is currently experiencing significant volatility. Further declines in the Baltic Dry Index, deterioration in global trade volumes, or continued depreciation of vessel values could materially change the negotiating landscape, requiring the preparation of revised analyses, updated recovery waterfalls, and potentially a fundamental reassessment of the restructuring strategy. Conversely, a recovery in market conditions could improve the client's negotiating position and reduce the intensity of the engagement.
Budget Variance. Given the dual-track nature of the engagement and the complexity of multi-party negotiations involving four distinct creditor groups and multiple jurisdictions, actual fees could exceed the Scenario A high estimate. Based on our experience with comparable matters, a working budget of $2,000,000 to $2,500,000 should be communicated to the client as the expected range for the out-of-court path, with an express caveat that a Chapter 11 filing would increase total fees substantially. The client should also be advised that the budget is subject to revision as the matter develops and that periodic budget updates will be provided.
VIII. Recommended Next Steps
In order to ensure a smooth ramp-up of the engagement and timely commencement of Phase 1 work, the following next steps are recommended:
1. Confirm Staffing Availability. Confirm the availability of all proposed team members, particularly Amy Chesterton and Nathan Ikeda, who will carry the heaviest workloads over the projected engagement period. Coordinate with the Bankruptcy & Restructuring practice group leader to ensure that Amy and Nathan are substantially dedicated to this matter and that their other commitments are appropriately managed. Any staffing conflicts should be identified and resolved within the first week of the engagement.
2. Supplemental Engagement Letter for Tax Advisory Scope. Coordinate with Sylvia Hartwell on the preparation and execution of the supplemental engagement letter covering the scope of tax advisory services. The target execution date is November 5, 2022. The supplemental letter should clearly delineate the scope of tax

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