PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 125 Broad Street, New York, NY 10004
MEMORANDUM
To: Robert Adeyemi, Responsible Partner, Capital Markets
From: Natasha Forbes, Working Associate, Capital Markets
Date: June 10, 2024
Re: Dormancy Status Update — Thalassa Shipping & Logistics SA — $400,000,000 Senior Secured Notes due 2029 — Matter No. 1044-00004 / Client No. 80214-TSL
Status: DORMANT (since December 1, 2022)
Prior Dormancy Memorandum: December 1, 2022 (updated September 8, 2023)
I. Purpose
This memorandum updates the dormancy record for the above-captioned matter following a status call held on June 10, 2024, with management of Thalassa Shipping & Logistics SA ("TSL" or the "Company"). The call was held by videoconference at approximately 10:00 a.m. Eastern Time (5:00 p.m. Greece; 10:00 p.m. Singapore).
The following individuals participated on the call:
• Robert Adeyemi, Responsible Partner, Capital Markets, Calderwood & Harkness LLP ("C&H")
• Natasha Forbes, Working Associate, Capital Markets, Calderwood & Harkness LLP
• Spyros Andreou, Chief Executive Officer, Thalassa Shipping & Logistics SA
• Marina Demetriou, Chief Financial Officer, Thalassa Shipping & Logistics SA; sole director of Thalassa Finance Pte. Ltd. ("TFPL")
This memorandum summarizes the following matters discussed on the call and addressed in the analysis below: (a) the client's current assessment of market conditions relevant to a potential relaunch of the offering; (b) the potential timeline for reactivation of the matter; (c) the documentation refresh requirements that would be necessary if the offering is relaunched; (d) the updated financial disclosure timeline applicable to a relaunched offering; and (e) estimated incremental fees and costs associated with the reactivation.
This memorandum should be read in conjunction with the original Dormancy Memorandum dated December 1, 2022 (updated September 8, 2023), prepared by Brendan Walsh, then lead associate on this matter, and reviewed by Robert Adeyemi. All capitalized terms used but not defined herein have the meanings given to them in the original Dormancy Memorandum or, as applicable, in the near-final Offering Memorandum (4th draft, dated September 12, 2022) (the "OM").
II. Transaction Summary (Recap)
For ease of reference, the following is a summary of the principal terms and parties of the proposed offering as contemplated at the time the matter was shelved. These terms reflect the state of the transaction as of the date of the last substantive drafting session (September 2022) and are subject to revision upon reactivation.
Issuer / Client. Thalassa Shipping & Logistics SA, a Société Anonyme organized under the laws of the Hellenic Republic, headquartered at 42 Akti Miaouli, Piraeus 185 35, Greece (General Electronic Commercial Registry ("GEMI") No. 148276201000).
Co-Issuer. Thalassa Finance Pte. Ltd., a Singapore private company limited by shares (Unique Entity Number ("UEN") 202209345K), a wholly-owned subsidiary of TSL, with its registered office at 8 Marina Boulevard, #36-02, Marina Bay Financial Centre Tower 1, Singapore 018981. TFPL was incorporated for the sole purpose of serving as co-issuer of the Notes.
Proposed Offering. $400,000,000 aggregate principal amount of Senior Secured Notes due 2029 (the "Notes"), to be governed by Singapore law.
Indicative Coupon. 8.750% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on the first such date following the issue date.
Issue Price. 98.00% of par, reflecting an original issue discount ("OID") of 2.00%, resulting in estimated gross proceeds to the Issuers of $392,000,000.
Maturity. Seven years from the issue date. The originally targeted issue date was October 15, 2022, which would have resulted in a maturity date of October 15, 2029. The actual maturity date will depend on the issue date ultimately selected upon reactivation.
Format. The Notes were to be offered in two tranches: (i) to qualified institutional buyers in the United States in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act") (proposed CUSIP 87265T AA1; proposed ISIN US87265TAA10); and (ii) to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act (proposed ISIN XS2498731056; proposed Common Code 249873105). None of the proposed CUSIP, ISIN, or Common Code identifiers were activated, and reapplication may be required upon reactivation.
Proposed Listing. The Notes were to be listed on the Singapore Exchange Securities Trading Limited ("SGX-ST"). No listing application was filed.
Use of Proceeds. The net proceeds of the offering were to be applied as follows:
• Approximately $190,000,000 for the refinancing in full of the bilateral term loan facility with Meridian Maritime Bank AG (the "Meridian Facility");
• Approximately $120,000,000 for the refinancing in full of the bilateral term loan facility with Clearwater Shipping Finance Ltd. (the "Clearwater Facility");
• Approximately $72,000,000 for general corporate purposes, including fleet capital expenditures; and
• Approximately $18,000,000 for the payment of estimated transaction fees, expenses, and OID.
Security Package. The Notes were to be secured by a comprehensive security package consisting of:
• First-priority ship mortgages over 28 designated Collateral Vessels (appraised by Compass Marine Valuations Ltd. at an aggregate charter-free market value of $1,175,000,000 as of June 2022, representing a collateral coverage ratio of approximately 2.94x the principal amount of the Notes);
• Assignment of earnings and insurances with respect to each Collateral Vessel;
• Pledge of 100% of the equity interests in TFPL and each of the fleet-owning guarantor subsidiaries;
• Assignment of $365,000,000 in intercompany loan receivables owed by fleet-owning subsidiaries to TSL.
Guarantors. The Notes were to be jointly and severally guaranteed on a senior secured basis by:
• Thalassa Dry Bulk Operations Ltd., a company organized under the laws of Malta;
• Thalassa Container Feeder Ltd., a company organized under the laws of the Republic of the marshall Islands;
• Thalassa Port Services FZCO, a free zone company established in the Jebel Ali Free Zone, Dubai, United Arab Emirates;
• Thalassa Freight Solutions Pte. Ltd., a company incorporated in Singapore;
together with a limited parent guarantee from Kallistratos Maritime Holdings Ltd., a company organized under the laws of the British Virgin Islands ("KMH"), capped at $50,000,000.
Lead Bookrunner / Initial Purchaser. Anchor Bay Securities LLC ("ABS"), 599 Lexington Avenue, 28th Floor, New York, NY 10022. Key contacts: Marcus Reinhardt (Managing Director), Priya Subramanian (Executive Director), David Loh (Vice President).
Co-Manager / Initial Purchaser. Halcyon Partners International Ltd. ("HPI"), 25 Old Broad Street, London EC2N 1HQ, United Kingdom. Key contacts: James Ogilvie (Managing Director), Sophie Chen (Director).
Trustee. Marlowe Asset Management Trust Company of Singapore Pte. Ltd. ("Marlowe Asset Management"), 80 Robinson Road, #02-00, Singapore 068898, UEN 199804782D. Key contact: Richard Tan (Senior Trust Officer).
Security Agent. Atlas Collateral Agency Pte. Ltd. ("Atlas"), 80 Robinson Road, #02-00, Singapore 068898, UEN 200115678R. Key contact: Karen Ng (Director, Collateral Services).
Initial Purchasers' Counsel. Whitfield & Crane LLP ("W&C"), 30 Hudson Yards, New York, NY 10001. Key contacts: Thomas Whitfield III (Partner), Rebecca Samuels (Partner).
Trustee's Counsel. Thornton Ashworth LLP, 1 Raffles Place, #44-02, Singapore 048616. Key contact: Michelle Goh (Partner).
Greek Local Counsel. Delphi & Karidis LLP, 15 Vasilissis Sofias Avenue, Athens 106 71, Greece. Key contact: Nikolaos Karidis (Managing Partner).
Singapore Local Counsel. Rajendra & Osman LLP, 6 Battery Road, #28-01, Singapore 049909. Key contact: Anil Rajendra (Senior Partner).
Auditor / Comfort Letter Provider. Kestrel & White Chartered Accountants, 22 Kifisias Avenue, Marousi 151 25, Athens, Greece. Key contact: Georgios Papadimitriou (Engagement Partner).
Fleet Appraiser. Compass Marine Valuations Ltd., 3 Thomas More Square, London E1W 1WY, United Kingdom. Key contact: Robert Hargreaves (Managing Director).
Rating Agencies.
• Polaris Ratings Group Ltd. ("Polaris"), Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08, Bermuda. Key contact: Carl Johansson (Senior Analyst, Shipping & Transportation). Preliminary rating: B+ (stable outlook), assigned on hold effective November 2, 2022.
• Oceanic Credit Assessments Inc. ("OCA"), 120 Broadway, Suite 2200, New York, NY 10271. Key contact: Linda Park (Senior Analyst, Global Shipping). Preliminary rating: B1 (stable outlook), assigned on hold effective November 4, 2022.
III. History of Dormancy
A. Reasons for Original Shelving (Late 2022)
The offering was shelved in the fall of 2022 as a result of a sharp deterioration in dry-bulk shipping market conditions, which materially undermined the economic rationale for the transaction at the pricing terms then under discussion. The principal factors are summarized below.
The Baltic Dry Index ("BDI"), which serves as a broad benchmark for dry-bulk shipping rates, collapsed from a level of approximately 3,400 in May 2022 to below 1,200 by late October 2022, representing a decline of approximately 65%. This collapse reflected a combination of weakening Chinese steel production and commodity demand, easing port congestion that had artificially tightened vessel supply in prior quarters, and broader macroeconomic uncertainty driven by rising global interest rates.
As a direct consequence of the BDI decline, projected charter rates for TSL's core Supramax and Ultramax fleet segments compressed by approximately 40–55% relative to the annualized rates prevailing during Q1 2022, which had formed the basis for the financial projections and pro forma financial data included in the near-final OM.
TSL's forward-looking Adjusted EBITDA estimate for fiscal year 2023 declined from approximately $214,600,000 (on a Q1 2022 annualized basis, as reflected in the near-final OM) to approximately $128,000,000, a reduction of approximately 40%. On a pro forma basis after giving effect to the offering, this revised EBITDA estimate would have resulted in a pro forma net leverage ratio of approximately 2.67x, calculated as ($400,000,000 in Notes principal minus $58,300,000 in cash) divided by $128,000,000 in estimated FY2023 Adjusted EBITDA. While this leverage level would have remained within the proposed 3.50x incurrence-based net leverage covenant set forth in the near-final Indenture, TSL management concluded that the resulting credit profile was economically unattractive and would not support the 8.750% coupon pricing originally contemplated.
Anchor Bay Securities and Halcyon Partners advised TSL and C&H that, in the deteriorated market environment, the offering would need to be repriced to an indicative coupon in the range of 10.50–11.00% in order to generate sufficient investor demand at an acceptable clearing level. TSL's board of directors, led by Chairman Dimitrios Kallistratos, deemed this repricing unacceptable and resolved to delay the offering pending a recovery in market conditions.
The chronology of the shelving process was as follows:
• September 26, 2022: First postponement of the planned launch date. The original marketing timeline contemplated a roadshow commencing on September 26 and pricing on or about October 10, 2022. ABS and HPI recommended a delay in light of deteriorating investor sentiment.
• October 3, 2022: Second postponement. TSL, ABS, and HPI conducted a call to reassess timing; ABS indicated that market conditions continued to deteriorate and that an immediate launch was inadvisable.
• October 17, 2022: TSL's board of directors adopted a resolution to delay the offering indefinitely pending improvement in market conditions. The resolution authorized management to re-engage ABS when circumstances warranted.
• November 14, 2022: Formal suspension notice delivered by TSL to ABS, confirming the indefinite postponement of the offering. C&H assisted in drafting the notice, which is on file.
B. Chronology of Dormancy Period
The following is a chronological summary of the principal events and touchpoints during the dormancy period:
• December 1, 2022: C&H issued an interim fee invoice to TSL covering work performed through the date of shelving. The matter was coded as dormant in the firm's billing and matter management systems. Brendan Walsh, then lead associate, prepared the initial Dormancy Memorandum, which was reviewed by Robert Adeyemi and placed on file.
• March 15, 2023: Periodic check-in call with Spyros Andreou and Marina Demetriou. TSL confirmed that the matter remained dormant and that no reactivation timeline was under consideration. No material developments were reported. The Dormancy Memorandum was not updated, as no substantive changes warranted revision at that time.
• September 8, 2023: Annual review conducted in accordance with C&H dormancy administration protocols. Brendan Walsh updated the Dormancy Memorandum (with review by Robert Adeyemi) to reflect the continued dormancy status, the March 2023 check-in, and the passage of time. No substantive changes to the transaction or documentation were noted.
• June 10, 2024: Most recent status call, which is the subject of this memorandum.
C. Rating Agency Status
Both rating agencies that were engaged in connection with the offering assigned preliminary ratings that were placed on hold simultaneously with the shelving of the transaction. The current status of each is as follows:
Polaris Ratings Group Ltd. Polaris assigned a preliminary rating of B+ with a stable outlook to the proposed Notes. This preliminary rating was placed on hold effective November 2, 2022, following notification from ABS that the offering had been postponed indefinitely. C&H has had no subsequent communication with Polaris regarding this matter during the dormancy period, and the preliminary rating remains on hold. Reactivation of the rating process will require formal re-engagement with Carl Johansson (or his successor, if applicable), submission of updated financial data, and potentially a renewed analytical review. There is a risk that Polaris may treat the reactivation as a de novo engagement, which could result in a different rating level or outlook based on updated financials and market conditions.
Oceanic Credit Assessments Inc. OCA assigned a preliminary rating of B1 with a stable outlook to the proposed Notes. This preliminary rating was placed on hold effective November 4, 2022, under the same circumstances described above. The same re-engagement requirements and risks apply as with respect to Polaris.
IV. Summary of June 10, 2024 Status Call
A. TSL's Current Market Assessment
On the call, Spyros Andreou provided an update on TSL's assessment of current dry-bulk shipping market conditions and the implications for a potential reactivation of the offering.
Mr. Andreou reported that the BDI has been fluctuating in the range of approximately 1,700–2,100 over recent months, reflecting a meaningful recovery from the sub-1,200 levels that prevailed at the time the offering was shelved in late 2022, but still below the approximately 3,400 level that prevailed at the peak in May 2022. TSL's internal market research team, in consultation with its chartering desk, is projecting a sustained BDI level above 2,000 by Q4 2024, driven by two principal factors: (i) an anticipated increase in Chinese commodity demand for iron ore and coal resulting from government-led infrastructure stimulus measures, and (ii) growing tonnage-supply constraints arising from an aging global dry-bulk fleet and limited newbuild orderbook growth.
Mr. Andreou indicated that if the BDI sustains above the 2,000 level on a continuous basis through the end of calendar year 2024, the Company would target a Q1 2025 reactivation of the offering. He emphasized, however, that this timeline is indicative only and that any decision to proceed with the reactivation remains subject to formal approval by the TSL board of directors, including the concurrence of Chairman Dimitrios Kallistratos and the Pelagos Capital Partners Fund III LP board representatives (through Andreas Vournas, Pelagos's designated director nominee).
B. TSL's Current Financial Position (Management's Verbal Summary)
Marina Demetriou provided a high-level verbal update on TSL's current financial position during the call. It is important to note that no audited or reviewed financial statements were shared on the call, and C&H has not received any updated financial data from TSL since the dormancy was initiated. All figures set forth below represent management's unaudited estimates as communicated verbally and are subject to verification against audited financial statements upon reactivation.
Fleet Composition. TSL's fleet remains at 50 vessels, comprising 38 dry-bulk carriers (primarily Supramax and Ultramax classes) and 12 container feeder vessels. Ms. Demetriou confirmed that there have been no vessel dispositions or acquisitions since Q1 2022, which was the reference date for the fleet data in the near-final OM.
Fleet Age. As a consequence of the passage of approximately two additional years without fleet renewal, the average age of the fleet is now approximately 11.2 years, compared to approximately 9.2 years at the time of the original OM. This aging of the fleet has implications for both fleet valuation and regulatory compliance (particularly with respect to IMO EEXI and CII requirements), which are discussed further in Section XI below.
Existing Debt. The existing bilateral facilities with Meridian Maritime Bank AG ($190,000,000) and Clearwater Shipping Finance Ltd. ($120,000,000) remain outstanding and have been serviced on schedule throughout the dormancy period. Total existing debt remains at $310,000,000. Ms. Demetriou did not indicate that any amendments, waivers, or modifications have been made to the terms of either facility during the dormancy period, but this will need to be confirmed through a review of the relevant facility documentation upon reactivation.
Cash Position. Cash on the balance sheet is estimated at approximately $72,000,000, reflecting an increase from the $58,300,000 level as of Q1 2022 that was reflected in the near-final OM. This increase is consistent with the Company's continued generation of positive free cash flow during the dormancy period.
Revenue and EBITDA. Ms. Demetriou provided the following high-level financial estimates:
• FY2023 actual revenue: approximately $520,000,000.
• FY2023 actual Adjusted EBITDA: approximately $142,000,000.
• Q1 2024 annualized revenue: trending toward approximately $580,000,000–$610,000,000.
• Q1 2024 annualized Adjusted EBITDA: trending toward approximately $165,000,000–$180,000,000.
These figures, if confirmed by audited financial data, would represent a significant improvement over the approximately $128,000,000 FY2023 Adjusted EBITDA estimate that contributed to the shelving of the offering in late 2022, and would bring the Company's earnings trajectory closer to the levels that originally supported the transaction economics.
Caveat: All of the foregoing figures are management's unaudited estimates shared verbally on the call. C&H has not independently verified any of these figures, and all financial data will need to be confirmed against audited financial statements and, ideally, interim reviewed financial statements upon reactivation.
C. TSL's Ownership Status
Mr. Andreou confirmed that there have been no changes in the ownership structure of TSL since the inception of the engagement. The current ownership structure remains as follows:
• 72.5% — Kallistratos Maritime Holdings Ltd. (BVI), 100% beneficially owned by Dimitrios Kallistratos, Chairman of the Board.
• 18.0% — Pelagos Capital Partners Fund III LP, a private equity fund managed by Pelagos Capital Partners LLC.
• 9.5% — Management ESOP trust.
Elena Kallistratos-Pavlou remains Vice Chairwoman of the Board and continues to oversee fleet management operations. Alexandros Theodorakis remains General Counsel of TSL.
D. TSL's Reactivation Conditions
Mr. Andreou and Ms. Demetriou identified the following conditions that TSL management considers necessary prerequisites for a decision to reactivate the offering:
1. The BDI must sustain above the 2,000 level on a continuous basis through Q4 2024, demonstrating that the recovery in dry-bulk charter rates is durable rather than transient.
2. Formal board and shareholder approval must be obtained, including the consent of the Pelagos Capital Partners Fund III LP board representatives (acting through Andreas Vournas). Mr. Andreou indicated that Pelagos's consent is a contractual requirement under the shareholders' agreement governing TSL.
3. An updated fleet appraisal must be obtained confirming that the collateral coverage ratio remains at or above the 2.00x maintenance covenant level contemplated by the near-final Indenture. Given the aging of the fleet and the passage of two years since the prior appraisal, there is a meaningful risk that collateral values may have declined.
4. Updated audited financial statements for FY2023 must be available, and ideally, Q1 2024 interim reviewed financials should also be available to provide investors and rating agencies with the most current financial picture.
5. Re-engagement with Anchor Bay Securities and Halcyon Partners must occur to obtain updated pricing guidance and an assessment of current investor appetite for shipping high-yield paper.
6. Re-engagement with both Polaris and OCA must occur to lift the preliminary ratings from hold status and potentially obtain updated or refreshed ratings based on current financial data and market conditions.
V. Documentation Refresh Requirements
The documentation suite for the proposed offering was brought to a near-final state prior to the shelving of the transaction in September–October 2022. While this represents a substantial foundation from which to work, the passage of approximately two years since the last substantive drafting session means that virtually every document in the suite will require some degree of updating, ranging from minor conforming changes to comprehensive substantive revision. The following is a section-by-section analysis of the anticipated refresh requirements.
A. Offering Memorandum
The near-final OM (4th draft, dated September 12, 2022) is approximately 280 pages in length. Substantial updates will be required in virtually every section of the document. The principal areas requiring revision are as follows:
Financial Data. All financial tables, including the summary historical financial data, the capitalization table, and all pro forma adjustments, will need to be completely replaced with data derived from the FY2023 audited financial statements and the most recent available interim period (ideally Q1 2024 or Q2 2024 reviewed financials). Revenue, Adjusted EBITDA, net leverage ratios, fixed charge coverage ratios, and all other financial metrics will need to be recalculated based on the updated data. The "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections will need to be substantially rewritten to reflect the financial performance and trends during the dormancy period (FY2022 through the most recent interim period).
Business Description. The business description sections of the OM will need to be updated to reflect: (i) the current fleet profile, including the increase in average vessel age from approximately 9.2 years to approximately 11.2 years; (ii) any changes to trade lane operations, geographic deployment patterns, or customer mix; (iii) new or renewed charter party arrangements entered into since Q1 2022; (iv) the updated drydocking schedule, including any drydockings completed during the dormancy period and the forward drydocking calendar; and (v) regulatory developments affecting the shipping industry, most notably the extension of the European Union Emissions Trading System ("EU ETS") to maritime shipping effective January 1, 2024, and the ongoing implementation of the International Maritime Organization's ("IMO") Energy Efficiency Existing Ship Index ("EEXI") and Carbon Intensity Indicator ("CII") requirements.
Risk Factors. A comprehensive refresh of all market-related, operational, and regulatory risk factors will be necessary. In addition to updating existing risk factors to reflect current conditions, new risk factors will need to be drafted to address, among other things: (i) the approximately two-year aging of the fleet without renewal, and the associated implications for vessel valuation, charter rate competitiveness, and regulatory compliance; (ii) the updated environmental regulatory landscape, including the EU ETS and IMO EEXI/CII compliance obligations and their potential impact on operating costs and capital expenditure requirements; and (iii) any new geopolitical risks affecting TSL's principal trade lanes in the Eastern Mediterranean, Black Sea, and Southeast Asia regions, including ongoing disruptions related to the Red Sea/Suez Canal corridor.
Use of Proceeds. The intended use of proceeds must be verified. C&H will need to confirm that the refinancing of the Meridian Facility ($190,000,000) and the Clearwater Facility ($120,000,000) remains the Company's intended primary use of proceeds, confirm the amounts currently outstanding under each facility (which may differ from the original balances if any interim amortization has occurred), ascertain whether any amendments to the terms of either facility have been executed during the dormancy period, and recalculate the allocation to general corporate purposes and fleet capital expenditures.
Capitalization Table. The capitalization table will need to be recalculated entirely based on updated debt levels, the current cash position (estimated at approximately $72,000,000), and any changes to the Company's equity or quasi-equity structure.
Description of Notes / Covenant Summary. The covenant summary and description of the Notes will need to be reviewed to confirm that the near-final Indenture terms remain acceptable to all parties. Any repricing of the coupon (which is expected to differ from the 8.750% indicative level from 2022) will require corresponding updates throughout the OM. Additionally, the covenant levels themselves (3.50x incurrence net leverage, 2.00x collateral coverage maintenance, restricted payments basket of the greater of $30,000,000 and 10% of Consolidated Net Tangible Assets) should be reassessed in light of the updated financial profile.
Taxation. The tax disclosure sections of the OM will need to be reviewed for any changes in applicable tax law in each relevant jurisdiction since September 2022, including Greece, Singapore, the British Virgin Islands, Malta, the Republic of the marshall Islands, and Dubai (UAE). C&H will coordinate with local counsel in each jurisdiction to obtain updated tax advice as necessary.
Plan of Distribution / Transfer Restrictions. The plan of distribution and transfer restrictions sections will need to be reviewed for any regulatory changes affecting the mechanics of a Rule 144A / Regulation S offering since 2022, including any updates to FINRA requirements, Regulation S safe harbor provisions, or applicable selling restrictions in secondary jurisdictions.
Estimated C&H Hours for OM Refresh: 350–500 hours.
B. Indenture and Transaction Agreements
Indenture. The near-final Indenture (5th draft, dated September 6, 2022) represents the most heavily negotiated document in the suite and was the product of extensive negotiation among C&H (for TSL), Whitfield & Crane (for the Initial Purchasers), and Thornton Ashworth (for the Trustee). Upon reactivation, all financial definitions will need to be reviewed and confirmed to ensure that the covenant levels remain appropriate in light of the updated financial data. In particular, the 3.50x incurrence-based net leverage ratio, the 2.00x collateral coverage maintenance covenant, and the restricted payments basket (the greater of $30,000,000 and 10% of Consolidated Net Tangible Assets) should be assessed against the Company's current and projected financial profile.
Purchase Agreement. The near-final Purchase Agreement between the Issuers, the Guarantors, and the Initial Purchasers will need to be updated to reflect: (i) revised representations and warranties based on updated factual circumstances; (ii) updated conditions precedent to closing; (iii) revised financial backstop and "market out" provisions; and (iv) updated pricing terms, including the coupon rate, issue price, OID, and Initial Purchaser discount, once ABS and HPI provide revised pricing guidance.
Registration Rights Agreement. The near-final Registration Rights Agreement will need to be reviewed for any regulatory updates, but is expected to require only minimal changes.
Intercreditor Agreement. The near-final Intercreditor Agreement (3rd draft) will need to be reviewed to confirm that the structural arrangements among the Noteholders, the Trustee, and the Security Agent remain as contemplated. Any changes to the security package or the priority of liens will need to be reflected.
Paying Agent and Transfer Agent Agreement. The near-final agreement with Marlowe Asset Management Trust Company of Singapore Pte. Ltd. will need to be reviewed, and C&H should confirm that Marlowe Asset Management remains willing to serve in this capacity. Fee terms (current: acceptance fee of $25,000; annual fee of $15,000) should be reconfirmed, as these may have changed during the dormancy period.
Forms of Global Notes. The forms of the Rule 144A and Regulation S Global Notes will need to be reviewed and updated as necessary. The previously proposed ISIN, CUSIP, and Common Code identifiers (ISIN XS2498731056, ISIN US87265TAA10, CUSIP 87265T AA1, Common Code 249873105) were never activated with the relevant depositaries and clearing systems (DTC, Thackeray Partners LLC, Ashgrove Enterprises). Upon reactivation, it may be necessary to reapply for these identifiers, and new identifiers may be assigned.
Supplemental Indenture (Guarantor Joinder). The form of Supplemental Indenture for guarantor joinder is not expected to require changes unless new subsidiaries have been formed during the dormancy period that would be required to accede as Guarantors.
Estimated C&H Hours for Indenture/Transaction Agreement Refresh: 150–250 hours.
C. Security Documents
The security document suite — including the Deed of Ship Mortgage forms, Deed of Assignment of Earnings and Insurances, Share Pledge Agreements (for TFPL and each Guarantor subsidiary), and Assignment of Intercompany Loan Receivables — will all require review and updating upon reactivation.
The following key issues will need to be addressed:
Collateral Vessel Confirmation. C&H will need to confirm that the 28 designated Collateral Vessels remain in the fleet, that none have been sold, scrapped, or transferred, and that no changes have been made to their flag-state registrations, vessel names, or ownership chain since Q1 2022. Any such changes would require revisions to the mortgage forms and potentially to the overall security structure.
Updated Fleet Appraisal. An updated fleet appraisal will need to be commissioned from Compass Marine Valuations Ltd. (Robert Hargreaves). The most recent appraisal, a desktop valuation dated June 2022, is now two years stale and will not be accepted by investors, the Initial Purchasers, or the rating agencies as a current indication of collateral value. The June 2022 appraisal valued the total fleet at $1,820,000,000 and the 28 Collateral Vessels at $1,175,000,000, implying a collateral coverage ratio of approximately 2.94x. Given the two-year aging of the fleet and movements in secondhand vessel prices over the intervening period, the updated appraisal may yield materially different values.
Intercompany Loan Receivables. The balance of the intercompany loan receivables assigned as part of the security package was $365,000,000 as of Q1 2022. This balance will need to be reconfirmed, as it may have changed as a result of ordinary-course intercompany transactions during the dormancy period.
Security Agent Confirmation. Atlas Collateral Agency Pte. Ltd. (Karen Ng, UEN 200115678R) should be contacted to confirm its continued willingness to serve as Security Agent and to update engagement terms and fees if necessary. The current fee terms are: acceptance fee of $20,000; annual fee of $30,000.
Estimated C&H Hours for Security Document Refresh: 80–120 hours.
D. Legal Opinions
Upon reactivation, all legal opinions will need to be refreshed or reissued to reflect the current state of applicable law, updated corporate authorizations, and any structural or factual changes since September 2022. The required opinions are as follows:
Calderwood & Harkness Singapore-Law Opinion. C&H's draft Singapore-law opinion (covering enforceability of the Indenture, the Notes, and certain ancillary documents governed by Singapore law) will need to be updated to reflect the current state of Singapore law as of the closing date, updated corporate authorizations for TFPL, and any structural changes to the transaction.
Delphi & Karidis Greek-Law Opinion. Delphi & Karidis (Nikolaos Karidis) will need to issue an updated Greek-law opinion covering, among other things, the corporate status and capacity of TSL, the due authorization and enforceability of TSL's obligations under the transaction documents, the validity of the ship mortgages and other Greek-law security interests, and related matters. This will require refreshed corporate due diligence on TSL, including updated GEMI filings, current constitutional documents, and confirmation of current board composition and authorization.
Rajendra & Osman Singapore-Law Opinion. Rajendra & Osman (Anil Rajendra) will need to issue an updated Singapore-law opinion covering the corporate status and capacity of TFPL. This will require an updated ACRA search on TFPL (UEN 202209345K), confirmation that Marina Demetriou remains the sole director, and an updated enforceability analysis under current Singapore law.
Local Counsel Availability. C&H should confirm that all local counsel firms remain available for the engagement and that no new conflicts have arisen during the dormancy period.
E. Due Diligence
The comprehensive Due Diligence Memorandum prepared by Brendan Walsh and Natasha Forbes in July–August 2022, following the management presentation conducted at TSL's offices in Piraeus on July 25, 2022 and subsequently reviewed and approved by Robert Adeyemi, will require a full refresh upon reactivation. The refresh will encompass the following areas:
• Material Contracts: Updated review of all material charter parties, management agreements, and any shipbuilding or vessel acquisition contracts entered into since Q1 2022.
• Litigation: Confirmation of the status of any pending or threatened litigation, and review of any new litigation commenced during the dormancy period.
• Regulatory Compliance: Assessment of compliance with updated environmental and safety regulations, including IMO EEXI and CII requirements, EU ETS obligations, and any other regulatory developments.
• Environmental Compliance: Detailed review of the Company's environmental compliance posture in light of the extension of the EU ETS to maritime shipping effective January 1, 2024, including any EU Allowance ("EUA") purchase obligations and the Company's carbon intensity performance under the IMO CII framework.
• Employment: Confirmation of key management personnel and any material changes in employment arrangements.
• Insurance: Review of current insurance coverage, including hull and machinery, P&I, and loss of hire policies, and any changes in coverage terms or underwriters since 2022.
• Tax Structuring: Confirmation that the existing tax structure remains efficient and that no changes in applicable tax law require restructuring.
A new management presentation session will likely be required to bring C&H and W&C up to date on the Company's operations, strategy, and financial outlook. C&H will coordinate with W&C on the format and timing of the management presentation.
The form of Officers' Certificate (to be executed by Spyros Andreou and Marina Demetriou at closing) should be reviewed to confirm that it remains in acceptable form.
F. Comfort Letter
The comfort letter request delivered by C&H to Kestrel & White Chartered Accountants (Georgios Papadimitriou) on August 1, 2022 is no longer operative, as it specified the financial data set forth in the September 2022 OM and a closing date that has long passed. A new comfort letter request will need to be prepared and delivered to Kestrel & White, specifying the updated financial data to be covered by the comfort procedures (SAS 72 or ISAE 3000/3400 equivalent).
C&H should confirm that Kestrel & White remains TSL's independent auditor and is available and willing to perform the required comfort letter procedures on the updated OM financial data. The fee for the comfort letter engagement was previously estimated at €85,000 (approximately $89,250 at the then-prevailing exchange rate); the fee for an updated engagement may increase, particularly if the scope of the comfort procedures is expanded to cover additional fiscal years and interim periods.
G. Investor Presentation / Roadshow Materials
The near-final 45-slide roadshow investor presentation deck (dated September 19, 2022) will require a comprehensive refresh to reflect updated financial data, the current fleet profile, current and projected market conditions, and any revisions to the terms of the offering. The deck will need to be coordinated with the updated OM and aligned with any revised marketing strategy adopted by ABS and HPI.
Estimated C&H Hours for Roadshow Review: 30–50 hours.
H. Corporate Authorizations
Draft board resolutions for both TSL and TFPL will need to be refreshed to reflect updated transaction terms (including any revised pricing), updated date references, and any changes in authorized signatories or board composition since the original drafts were prepared in 2022. C&H should confirm the current board composition for TSL (previously seven directors, including two nominees of Pelagos Capital Partners Fund III LP) and the sole directorship of TFPL (Marina Demetriou).
I. Closing Checklist and Signature Pages
The master closing checklist for the transaction (comprising approximately 85 line items as of the last update in September 2022) will need to be updated with new target dates, refreshed deliverable status, and any additional line items arising from changes during the dormancy period. The assembled but unexecuted signature page package prepared in September 2022 should be reviewed for completeness and to identify any changes in signatories that would necessitate new signature pages.
J. Payoff Letters
Draft payoff letter requests to each of the two existing bilateral lenders will need to be updated upon reactivation:
• Meridian Maritime Bank AG (attention: Hans-Peter Gerber, Talstrasse 18, 8001 Zürich, Switzerland): The draft payoff letter request will need to be updated with the current outstanding balance under the Meridian Facility, per diem interest calculations, any breakage costs or prepayment fees, and any amendments to the facility terms executed since 2022.
• Clearwater Shipping Finance Ltd. (attention: Emma Blackwood, 1 Fleet Place, London EC4M 7RA, United Kingdom): The same updates will be required for the Clearwater Facility.
Both draft payoff letter requests remain on file in unsent form.
K. 10b-5 Disclosure Letter
The draft framework for Whitfield & Crane's Rule 10b-5 negative assurance letter (also referred to as a "10b-5 letter" or "disclosure letter") will need to be updated to reflect the scope of the revised OM and any changes in the factual or legal landscape that affect the scope of the negative assurance to be provided. C&H should coordinate with Thomas Whitfield III and Rebecca Samuels at W&C regarding the parameters of the updated letter.
VI. Third-Party Re-Engagement Requirements
Upon reactivation, C&H will need to coordinate the re-engagement of all third-party advisors and service providers involved in the transaction. The following is a summary of the re-engagement requirements for each party.
A. Initial Purchasers
Anchor Bay Securities LLC. Re-engagement with ABS (Marcus Reinhardt, Managing Director, 599 Lexington Avenue, 28th Floor, New York, NY 10022) will be required to confirm ABS's willingness to continue to serve as Lead Bookrunner and Initial Purchaser. ABS will need to provide updated pricing guidance, as the indicative 8.750% coupon and 98.00% issue price from 2022 will almost certainly need to be revised based on current market conditions, including the significant rise in global interest rates since mid-2022 and the evolving risk appetite for shipping high-yield credits. ABS will also need to provide an updated assessment of investor appetite and demand for a shipping high-yield offering in the current market environment. The fee terms, including the Initial Purchaser discount, will need to be reconfirmed. The Initial Purchaser discount was previously set at 2.00% of the aggregate principal amount ($8,000,000 in total), allocated 65% to ABS ($5,200,000) and 35% to HPI ($2,800,000).
Halcyon Partners International Ltd. Re-engagement with HPI (James Ogilvie, Managing Director, 25 Old Broad Street, London EC2N 1HQ) will be required on the same basis as described above for ABS.
B. Rating Agencies
Polaris Ratings Group Ltd. A formal request will need to be submitted to Carl Johansson (Senior Analyst, Shipping & Transportation, Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM 08, Bermuda) to reactivate the preliminary B+ (stable) rating process. TSL will need to provide updated financial data, fleet information, and management projections to support the rating reactivation. The original rating fee was $175,000; any incremental fees for the reactivation process will need to be negotiated.
Oceanic Credit Assessments Inc. A formal request will need to be submitted to Linda Park (Senior Analyst, Global Shipping, 120 Broadway, Suite 2200, New York, NY 10271) to reactivate the preliminary B1 (stable) rating process on the same basis. The original rating fee was $200,000; incremental fees may apply.
C. Trustee and Security Agent
Marlowe Asset Management Trust Company of Singapore Pte. Ltd. C&H should contact Richard Tan (Senior Trust Officer, 80 Robinson Road, #02-00, Singapore 068898, UEN 199804782D) to confirm Marlowe Asset Management's continued willingness to serve as Trustee under the Indenture and to review and update fee terms as necessary.
Atlas Collateral Agency Pte. Ltd. C&H should contact Karen Ng (Director, Collateral Services, same address, UEN 200115678R) to confirm Atlas's continued willingness to serve as Security Agent and to review and update fee terms as necessary.
Thornton Ashworth LLP. C&H should confirm with Michelle Goh (Partner, 1 Raffles Place, #44-02, Singapore 048616) that Thornton Ashworth remains available to serve as trustee's counsel and that no conflicts have arisen during the dormancy period.
D. Fleet Appraiser
Compass Marine Valuations Ltd. An updated fleet valuation must be commissioned from Robert Hargreaves (Managing Director, 3 Thomas More Square, London E1W 1WY). The prior desktop appraisal (dated June 2022) valued the total fleet at $1,820,000,000 and the 28 Collateral Vessels at $1,175,000,000, but this appraisal is now two years stale and will not be accepted by investors, Initial Purchasers, or rating agencies as a current indication of collateral value. C&H should discuss with Compass whether a desktop valuation will suffice or whether physical inspections of selected vessels will be required, and should obtain an estimate of the timeline and cost for the updated appraisal.
E. Local Counsel
Delphi & Karidis LLP. C&H should contact Nikolaos Karidis (Managing Partner, 15 Vasilissis Sofias Avenue, Athens 106 71) to confirm the firm's continued availability, verify that no new conflicts have arisen, and discuss the scope and timeline for updated Greek-law due diligence and opinion work.
Rajendra & Osman LLP. C&H should contact Anil Rajendra (Senior Partner, 6 Battery Road, #28-01, Singapore 049909) to confirm the firm's continued availability, verify that no new conflicts have arisen, and discuss the scope and timeline for updated Singapore-law due diligence and opinion work.
F. Auditor. Kestrel & White Chartered Accountants. C&H should contact Georgios Papadimitriou (Engagement Partner, 22 Kifisias Avenue, Marousi 151 25, Athens) to confirm the firm's continued availability, confirm that Kestrel & White remains TSL's independent auditor, and discuss the scope and fee for an updated comfort letter engagement.
VII. Estimated Incremental Fees and Costs for Reactivation
The following are C&H's estimates of the incremental fees and costs that would be incurred in connection with the reactivation and relaunch of the offering. These estimates are preliminary and subject to revision based on the actual scope of the documentation refresh, the extent of market and financial changes since 2022, and the outcome of re-engagement discussions with third-party advisors and service providers.
A. Calderwood & Harkness LLP Estimated Incremental Fees
The estimated incremental C&H hours for the reactivation are set forth below by workstream:
The blended hourly rate for the C&H team at current 2024 rates is estimated at approximately $1,150 per hour. This reflects an increase from the approximately $1,050 per hour blended rate in effect at the time of the original engagement in 2022, consistent with the firm's standard annual rate adjustments.
Estimated incremental C&H fees: $930,000–$1,390,000.
These estimated incremental fees are in addition to the approximately $2,400,000 in fees originally estimated at the time of the engagement, a substantial portion of which was billed through the interim invoice dated December 1, 2022, covering work performed from the engagement date through the shelving of the transaction.