1044-00004 · Client 1044 · Offering Memorandum & Disclosure

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MEMORANDUM

TO: Robert Adeyemi, Responsible Partner, Capital Markets, Calderwood & Harkness LLP

FROM: Brendan Walsh, Lead Associate, Capital Markets; Natasha Forbes, Working Associate, Capital Markets

DATE: September 10, 2022

RE: Risk Factors Drafting Memorandum — Offering Memorandum (4th Draft, dated September 12, 2022) for $400,000,000 Senior Secured Notes due 2029 issued by Thalassa Shipping & Logistics SA and Thalassa Finance Pte. Ltd.

Matter No.: 1044-00004

Client No.: 80214-TSL

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for internal use only. It is protected by the attorney-client privilege and the work product doctrine. It is not intended for distribution to, nor should it be shared with, the client, counterparties, underwriters, rating agencies, or any third party without the prior written authorization of the Responsible Partner. Any inadvertent disclosure does not constitute a waiver of privilege.

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I. Purpose and Scope

This memorandum has been prepared for internal Calderwood & Harkness LLP use to analyze, categorize, and provide detailed drafting commentary on the risk factors included in the near-final fourth draft of the Offering Memorandum (the "OM"), dated September 12, 2022, for the $400,000,000 aggregate principal amount of Senior Secured Notes due 2029 (the "Notes") to be co-issued by Thalassa Shipping & Logistics SA ("TSL" or the "Company") and Thalassa Finance Pte. Ltd. ("TFPL," and together with TSL, the "Issuers").

Purpose. The primary purpose of this memorandum is to provide the Calderwood & Harkness deal team with a comprehensive assessment of the completeness, accuracy, and adequacy of the risk factors section of the OM. The memorandum identifies areas where existing disclosure is sufficient, areas where modifications or enhancements are warranted, and areas where additional disclosure should be considered before the OM is finalized and circulated to investors. The memorandum also provides drafting commentary intended to guide revisions to the risk factors in the fifth and anticipated final draft of the OM.

Scope. This memorandum covers all risk factor categories included in the OM, organized according to the seven-category taxonomy adopted in the fourth draft. It provides cross-references to the business description, financial data, and other substantive sections of the OM, identifies areas where additional disclosure may be warranted, and flags coordination points with other workstreams, including the due diligence memorandum, the comfort letter request, and the 10b-5 negative assurance process.

Audience. This memorandum is intended solely for the internal Calderwood & Harkness team working on the TSL offering, including Robert Adeyemi (Responsible Partner), Brendan Walsh (Lead Associate), Natasha Forbes (Working Associate), and other members of the Capital Markets practice group who may be assigned to the matter. It is expressly not for distribution to the client (Thalassa Shipping & Logistics SA), any issuer or guarantor entity, Anchor Bay Securities LLC ("ABS," the initial purchaser), Whitfield & Crane LLP (issuer's counsel), the rating agencies, or any other third party.

Drafting History and Context. The first draft of the OM was circulated by Calderwood & Harkness on July 11, 2022. Whitfield & Crane LLP (Thomas Whitfield III, lead partner; Rebecca Samuels, lead associate) provided initial comments on behalf of the Issuers on July 18, 2022. Those comments principally addressed the business description and the description of the Notes, but also included substantive comments on several risk factors, particularly those relating to the controlling shareholder structure, the collateral package, and the Greek tonnage tax regime. ABS (Priya Subramanian, Managing Director; Marcus Reinhardt, Vice President) provided underwriter comments on July 25, 2022, which focused on market-facing disclosure adequacy and comparability with recent shipping high-yield precedents. Second and third drafts were circulated on August 5, 2022 and August 22, 2022, respectively. The current fourth draft, dated September 12, 2022, is substantially agreed among all parties, subject to the open items and recommendations identified in this memorandum.

10b-5 Negative Assurance Letter. It is important to note that Whitfield & Crane LLP, as issuer's counsel, will deliver a 10b-5 negative assurance letter at closing. That letter will state that, based on their participation in the preparation of the OM and subject to customary qualifications, nothing has come to their attention that causes them to believe that the OM contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The completeness and adequacy of the risk factors section is critical to supporting the delivery of that letter. Accordingly, any gaps or deficiencies identified in this memorandum should be addressed before the OM is finalized.

Offering Structure. For reference, the offering is structured as a Rule 144A / Regulation S offering of global notes, with settlement through the facilities of The Depository Trust Company ("DTC") for 144A notes and Stonefield Industries and Harborview Industries for Regulation S notes. The Indenture, the Security Documents, and the Intercreditor Agreement are governed by Singapore law. The Notes will be listed on the Singapore Exchange Securities Trading Limited ("SGX-ST"), subject to completion of the listing application process. Atlas Collateral Agency Pte. Ltd. serves as Security Agent and Meridian Trustees Pte. Ltd. serves as Indenture Trustee.

II. Risk Factor Taxonomy and Organization

The risk factors in the OM fourth draft are organized into seven principal categories, which were established in the first draft and have remained consistent through subsequent revisions. This organizational framework follows SEC and market convention for high-yield offering memoranda, presenting risks from the broadest (industry-level) to the most specific (tax and jurisdictional), and presenting the most material risks first within each category.

The seven categories are:

1. Risks Related to the Shipping Industry and Freight Markets — addressing macro-level industry risks that affect TSL's operating environment, including cyclicality, charter rate volatility, vessel supply dynamics, and global trade conditions.

2. Risks Related to TSL's Business and Operations — addressing company-specific business risks, including revenue concentration, key personnel dependence, controlling shareholder structure, operational complexity, and insurance coverage.

3. Risks Related to the Fleet and Vessels — addressing risks specific to TSL's fleet of 50 vessels, including vessel concentration, valuation volatility, age and capital expenditure requirements, and flag state and classification matters.

4. Risks Related to the Notes and the Offering Structure — addressing risks inherent in the terms and structure of the Notes, including their speculative-grade nature, refinancing risk, covenant limitations, optional redemption provisions, and transfer restrictions.

5. Risks Related to the Security Package and Collateral — addressing risks associated with the collateral securing the Notes, including enforcement limitations, intercreditor mechanics, guarantor and structural subordination risks, and the distinction between collateral and non-collateral vessels.

6. Risks Related to Environmental, Regulatory, and Compliance Matters — addressing regulatory risks, including IMO sulphur regulations, EU ETS inclusion, ballast water management, and sanctions and anti-corruption compliance.

7. Risks Related to Tax and Jurisdictional Matters — addressing tax risks associated with TSL's multi-jurisdictional structure and the Singapore law governing the transaction documents.

The ordering of risks within each category follows the convention of presenting the most material risks first. Within Category 1, for example, shipping industry cyclicality and the Baltic Dry Index are presented before vessel supply dynamics, reflecting TSL management's and ABS's view that cyclicality is the most significant industry-level risk. Within Category 4, refinancing and liquidity risk is presented before the more technical covenant limitation disclosures.

The risk factors section as currently drafted spans pages 22 through 78 of the OM fourth draft (approximately 56 pages), which is broadly consistent with comparable shipping high-yield offerings reviewed by the team (see Appendix B). The section contains a total of 41 individual risk factors distributed across the seven categories. A detailed index of each individual risk factor, with page references and short-form titles, is provided in Appendix A.

We note that the ordering and organization have been reviewed and approved by ABS (Priya Subramanian) and by Whitfield & Crane (Rebecca Samuels) without material objection. The principal open items relate to the substance and specificity of certain individual risk factors, rather than to the overall organizational framework.

Cross-reference: OM 4th Draft, pages 22–78 (Risk Factors section).

III. Category 1: Risks Related to the Shipping Industry and Freight Markets

Category 1 encompasses macro-level risks affecting the shipping industry and the freight markets in which TSL operates. This category contains eight individual risk factors in the OM fourth draft, of which the four most significant are discussed below with drafting commentary. The remaining four risk factors in this category (relating to seasonal demand fluctuations, bunker fuel price volatility, piracy and security threats, and port congestion and infrastructure constraints) are adequately drafted in the fourth draft and do not require material revision, subject to the general observations noted in Section XI of this memorandum.

III.A. Shipping Industry Cyclicality and the Baltic Dry Index

The dry-bulk and container feeder shipping industries are highly cyclical, driven by fluctuations in global commodity demand, trade volumes, vessel supply, and macroeconomic conditions. TSL's revenue and earnings are significantly correlated with the Baltic Dry Index ("BDI"), which is the most widely followed composite measure of dry-bulk shipping rates.

The OM fourth draft includes disclosure of TSL's financial performance in the context of current market conditions. At Q1 2022 annualized levels, TSL's last-twelve-months ("LTM") Revenue was $687.4 million and LTM Adjusted EBITDA was $214.6 million, representing a 31.2% Adjusted EBITDA margin. These results were achieved during a period when the BDI was at approximately 3,400 — a level that is historically elevated and significantly above the long-term average.

The OM includes a discussion of historical BDI volatility, referencing the well-known period of extreme decline during the 2008–2009 global financial crisis, when the BDI fell from over 11,000 in May 2008 to below 700 by December 2008, representing a decline in excess of 93% in approximately seven months. The OM also references subsequent periods of weakness, including the BDI trough in February 2016 (approximately 290), and the recovery to the 2,000–3,500 range during 2021–2022.

BDI sensitivity is particularly acute for TSL's 38 dry-bulk carriers, which include vessels in the Supramax, Ultramax, and Kamsarmax classes. These mid-size segments are directly benchmarked to the BDI and its component sub-indices (the Baltic Supramax Index and the Baltic Panamax Index). TSL's 12 container feeder vessels are less directly correlated with the BDI but are subject to analogous cyclical dynamics in the container feeder market.

Drafting Commentary. We recommend enhancing this risk factor with specific quantitative sensitivity disclosure. As currently drafted, the risk factor describes the cyclicality of the shipping industry and the BDI in general terms and references historical volatility, but it does not quantify the potential impact on TSL's earnings or credit metrics. Given the current trajectory of the BDI post-May 2022 (the BDI has declined from approximately 3,400 in early 2022 to approximately 1,700 as of the date of this memorandum), we believe it would be appropriate and prudent to include illustrative sensitivity analysis. Specifically, we recommend disclosure along the following lines: a 40–55% decline in charter rates from current levels (which is within the range of historical cyclical declines) could compress Adjusted EBITDA materially, potentially to levels in the range of $100–$130 million, with corresponding increases in net leverage and decreases in interest coverage. This disclosure is directly relevant to investors' assessment of the Notes' credit profile and is consistent with market practice in recent comparable shipping high-yield offerings (see Appendix B, noting that the Argonaut Maritime 2021 offering and the Oceanus Bulkers 2022 offering both included quantitative BDI sensitivity tables). We discuss this recommendation further in Section XI.A.

Cross-reference: OM Business Description, "Industry Overview" (pages 98–112) and "Our Fleet" (pages 113–125).

III.B. Charter Rate Volatility

TSL derives its revenue from three principal chartering arrangements: time charters, voyage charters, and contracts of affreightment ("COAs"). Each of these arrangements exposes TSL to charter rate volatility, although the nature and timing of the exposure differs among them. Time charters provide fixed daily hire rates for the duration of the charter period, mitigating short-term rate volatility but exposing TSL to the risk that rates available at the expiration of existing charters may be materially lower than current contractual rates. Voyage charters and COAs expose TSL to spot-market rate fluctuations on a voyage-by-voyage or shipment-by-shipment basis.

Charter rates are influenced by a complex interplay of factors, including the supply/demand balance in each vessel segment, global and regional trade volumes, commodity prices and production patterns, seasonal factors (including the impact of crop harvesting cycles on grain trade and winter heating demand on coal trade), weather patterns, and the size of the newbuild orderbook. Changes in any of these factors can result in rapid and material changes in charter rates.

The risk factor as currently drafted in the OM fourth draft addresses these dynamics in general terms. The disclosure includes a discussion of TSL's charter portfolio, noting that as of June 30, 2022, approximately 55% of TSL's available vessel days were committed under time charters with a weighted average remaining duration of approximately 14 months, while the remaining 45% were exposed to the spot market through voyage charters and COAs.

TSL's 12 container feeder vessels face related but distinct risks. These vessels operate primarily in the Eastern Mediterranean, Black Sea, and Southeast Asia trade lanes, where container feeder volumes are driven by mainline container trade volumes and transshipment hub activity at key ports such as Piraeus, Istanbul, and Singapore. Container feeder rates have historically exhibited somewhat different cyclical patterns than dry-bulk rates, but have been subject to comparable volatility during periods of market stress.

Drafting Commentary. We recommend ensuring that the disclosure addresses both spot and period charter exposure with specificity. The current fourth draft does not separately quantify the revenue attributable to each charter type (time charter, voyage charter, COA), which would be useful for investors seeking to assess the magnitude and timing of TSL's exposure to rate movements. We also recommend cross-referencing the fleet employment profile in the business description, which provides vessel-by-vessel charter information, to ensure consistency between the risk factor disclosure and the business description data.

Cross-reference: OM Business Description, "Our Fleet — Charter Portfolio" (pages 118–125); OM Financial Data, "Revenue by Charter Type" (pages 148–150).

III.C. Vessel Supply and Newbuilding Overhang

The global fleet of dry-bulk carriers and container feeder vessels is subject to supply-side dynamics that can materially affect charter rates and vessel values. An oversupply of vessels in the global fleet, whether resulting from the delivery of newbuild orders, reductions in scrapping rates, or decreases in demand, can depress charter rates and vessel values for extended periods. The risk factor as currently drafted in the OM fourth draft discusses the current state of the dry-bulk and container feeder orderbooks and the potential impact of future deliveries on fleet supply.

The newbuild orderbook as a percentage of the existing fleet is a key indicator of future supply growth. The OM fourth draft cites data from Camberwell Management Consulting indicating that the dry-bulk orderbook stood at approximately 7.2% of the existing fleet as of June 2022, which is relatively low by historical standards but represents a meaningful increase from the cyclical low of approximately 5.8% reached in late 2020. For container feeder vessels, the orderbook is significantly higher as a percentage of the existing fleet, reflecting the ordering wave driven by elevated container freight rates during 2021–2022.

The connection between newbuild deliveries and future vessel supply is well understood but the timing and magnitude of the impact are uncertain and depend on factors including shipyard delivery schedules, order cancellations, scrapping rates for older vessels, and regulatory changes (such as energy efficiency requirements) that may accelerate fleet renewal or retirement.

The risk factor also addresses the impact of fleet oversupply on TSL's ability to maintain fleet utilization rates. TSL achieved fleet utilization of approximately 96.3% in the twelve months ended June 30, 2022, but utilization rates are sensitive to market conditions and can decline rapidly during periods of weak demand or oversupply.

Cross-reference: OM Business Description, "Industry Overview — Fleet Supply Dynamics" (pages 104–108).

III.D. Global Trade and Macroeconomic Conditions

TSL's primary trade lanes — the Eastern Mediterranean, the Black Sea, and Southeast Asia — are sensitive to geopolitical disruptions, sanctions regimes, and regional economic conditions. The OM fourth draft includes a general discussion of macroeconomic risks and their impact on global trade, including references to GDP growth rates, industrial production indices, and commodity demand trends.

The Black Sea trade lane is specifically exposed to conflict-related disruption. The ongoing military conflict between Russia and Ukraine, which commenced in February 2022, has materially affected Black Sea shipping, including the suspension of grain exports from Ukrainian ports, disruption to Russian commodity exports (including iron ore, steel products, and petroleum products), increased war risk insurance premiums, and heightened regulatory scrutiny of vessels calling at Black Sea ports. TSL has historically derived a meaningful portion of its dry-bulk revenue from Black Sea trade, including grain and minor bulk cargoes loaded at Ukrainian and Russian ports.

Commodity demand patterns drive dry-bulk demand. Iron ore, coal, and grain are the three largest commodities by volume in the global dry-bulk trade, and demand for these commodities is in turn driven by steel production (principally in China and India), power generation, and agricultural consumption. Minor bulk commodities (including fertilizers, forest products, and aggregates) also contribute to dry-bulk demand and are subject to their own cyclical and seasonal patterns.

Container feeder volumes are dependent on mainline container trade volumes and transshipment hub activity. The Eastern Mediterranean feeder market is anchored by the transshipment hub at Piraeus, operated by Marlowe Holdings, and by the Istanbul transshipment complex. The Southeast Asia feeder market is anchored by Singapore, the world's largest transshipment hub by TEU volume. Disruptions to mainline trade flows or changes in transshipment patterns could materially affect container feeder demand in TSL's trade lanes.

Drafting Commentary. The current geopolitical risk disclosure in the OM fourth draft is somewhat generic in its treatment of Black Sea-related risks. We recommend enhancing the disclosure with specific reference to the ongoing conflict and its observed and potential impacts on TSL's operations, including: (i) the percentage of TSL's revenue historically derived from Black Sea trade lanes; (ii) the impact of the conflict on war risk insurance premiums and the availability of cover; (iii) the potential for further sanctions on Russian trade that could affect TSL's Black Sea operations; and (iv) the impact on grain trade flows following the Black Sea Grain Initiative (the "grain corridor" agreement brokered by the United Nations and Turkey in July 2022, which remains fragile and subject to renewal). This recommendation is discussed further in Section XI.C.

Cross-reference: OM Business Description, "Industry Overview — Trade Lanes and Commodity Demand" (pages 108–112).

IV. Category 2: Risks Related to TSL's Business and Operations

Category 2 encompasses risks specific to TSL's business, corporate structure, and operations. This category contains nine individual risk factors in the OM fourth draft, of which the five most significant are discussed below with drafting commentary. The remaining four risk factors in this category (relating to competition, technological disruption, labor relations and seafarer availability, and litigation and dispute risks) are adequately drafted in the fourth draft and do not require material revision.

IV.A. Revenue Concentration and Customer Dependence

TSL derives a significant portion of its revenue from a limited number of charterer counterparties. The OM fourth draft discloses that TSL's top five charterers accounted for approximately 38% of total revenue in the twelve months ended June 30, 2022, and that no single charterer accounted for more than 12% of total revenue during that period. While this level of concentration is not unusual for a shipping company of TSL's size, it creates meaningful counterparty credit risk — the default or insolvency of one or more major charterers could materially reduce TSL's revenue and cash flow.

The risk factor addresses the creditworthiness of TSL's charterer counterparties, noting that many of TSL's counterparties are commodity traders, mining companies, and regional shipping lines whose financial condition may be volatile and whose creditworthiness may deteriorate during periods of commodity price weakness or market stress. The OM includes disclosure that TSL does not publicly identify its major charterers by name, citing competitive sensitivity, but provides aggregate data on revenue concentration and counterparty credit quality.

Cross-reference: OM Business Description, "Our Customers" (pages 126–130).

IV.B. Dependence on Key Personnel

TSL was founded in 1997 by the Kallistratos family and has been led by family members since its inception. Dimitrios Kallistratos, the founder and Chairman, is 68 years old and has over 40 years of experience in the shipping industry. His daughter, Elena Kallistratos-Pavlou, serves as Vice Chairwoman and oversees fleet management, including vessel acquisition and disposal decisions, commercial management, and technical operations. The involvement of the Kallistratos family in the day-to-day management and strategic direction of TSL is deeply embedded in the company's operating model and corporate culture.

Spyros Andreou, the Chief Executive Officer, joined TSL in 2015 from Drayton Consulting Group, where he was a partner in the transportation and logistics practice. Andreou is credited with implementing TSL's diversification into container feeder operations, its expansion into the Southeast Asia trade lane, and its development of the integrated port logistics and freight-forwarding business. His strategic vision is considered critical to TSL's growth trajectory and market positioning.

Marina Demetriou, the Chief Financial Officer, is the sole director of Thalassa Finance Pte. Ltd. (the Singapore-incorporated co-issuer) and plays a central role in TSL's financial management, treasury operations, and capital markets strategy. She is the primary point of contact for the offering process and has been instrumental in structuring the Notes, negotiating covenant terms, and managing relationships with the rating agencies and the initial purchaser.

The risk factor as drafted addresses the risk of loss of key personnel and the challenges associated with family governance transition. It notes that TSL does not maintain key-person insurance on Dimitrios Kallistratos, Elena Kallistratos-Pavlou, or Spyros Andreou.

Drafting Commentary. We recommend emphasizing that Dimitrios Kallistratos is not only the Chairman and founder of TSL but also the 100% beneficial owner of Kallistratos Maritime Holdings Ltd. ("KMH"), the BVI holding company that is the 72.5% controlling shareholder of TSL. The succession risk is therefore not limited to management continuity — it extends to the ownership and control structure of TSL itself. In the event of Dimitrios Kallistratos's incapacity or death, the disposition of his interest in KMH (and therefore his indirect controlling interest in TSL) would be governed by his personal estate planning arrangements, which are not disclosed in the OM and are not subject to any contractual restrictions under the Indenture. This creates a risk that the controlling interest in TSL could pass to individuals who may not have the same commitment to, or competence in, the shipping business, or that disputes among heirs could disrupt TSL's governance and operations. We should discuss with Whitfield & Crane whether additional disclosure on this point is appropriate, bearing in mind that this is a sensitive topic for the Kallistratos family.

IV.C. Controlling Shareholder Risk

TSL's equity ownership is concentrated in Kallistratos Maritime Holdings Ltd. (BVI), which holds 72.5% of TSL's issued and outstanding shares. Dimitrios Kallistratos is the sole beneficial owner of KMH. Pelagos Capital Partners Fund III LP, a Cayman Islands-domiciled private equity fund managed by Pelagos Capital Management Ltd. (Andreas Vournas, Managing Partner), holds 18.0% of TSL's shares and has the right to nominate two of TSL's seven board members. The remaining 9.5% of TSL's shares are held by the management Employee Share Ownership Plan ("ESOP") trust.

The risk factor as drafted addresses several dimensions of controlling shareholder risk:

• Divergent Interests. The controlling shareholder may have interests that diverge from those of noteholders. For example, the controlling shareholder may prefer to maximize equity distributions, retain earnings for future equity investments outside of TSL, or approve related-party transactions that benefit the Kallistratos family at the expense of TSL's credit profile.

• blocking Power. The controlling shareholder, by virtue of its 72.5% voting stake, has the ability to approve or block virtually all fundamental corporate actions, including mergers, acquisitions, dispositions, capital raises, and amendments to TSL's articles of association. This includes the ability to approve transactions that could be detrimental to noteholders, such as the sale of substantial assets or the incurrence of additional debt (subject to covenant limitations under the Indenture).

• Pelagos Capital Board Representation. While Pelagos Capital has board representation (2 of 7 seats), it does not have sufficient board representation or voting power to block actions approved by the controlling shareholder. The Pelagos Capital board members (Andreas Vournas and one additional nominee) may provide an independent perspective, but they do not constitute a controlling or blocking minority.

• ESOP Trust. The management ESOP trust holds 9.5% of TSL's shares but does not exercise independent governance rights; the trustee is designated by the board (which is controlled by the controlling shareholder).

Cross-reference: OM "Principal Shareholders" (pages 131–134) and "Related Party Transactions" (pages 135–142).

IV.D. Integration and Operational Risks

TSL operates an integrated business model that encompasses vessel operations (dry-bulk and container feeder), port logistics services, and freight-forwarding operations. While this integrated model provides diversification of revenue streams and potential operational synergies, it also creates operational complexity and execution risk.

TSL's operations span multiple jurisdictions, including Greece (headquarters and principal place of management), Singapore (co-issuer and freight-forwarding subsidiary), Malta (dry-bulk fleet-owning subsidiary), marshall Islands (container feeder fleet-owning subsidiary), and Dubai/UAE (port services subsidiary). Each jurisdiction has its own regulatory regime, corporate law framework, tax system, and legal infrastructure. The coordination of operations across these jurisdictions requires significant management attention and creates risks related to regulatory compliance, information flows, cash management, and governance.

The four guarantor subsidiaries — Thalassa Dry Bulk Operations Ltd. (Malta), Thalassa Container Feeder Ltd. (Marshall Islands), Thalassa Port Services FZCO (Dubai), and Thalassa Freight Solutions Pte. Ltd. (Singapore) — are organized under four different legal systems and are subject to different regulatory regimes. This creates complexity in the security and guarantee structure and increases the risk of jurisdictional conflicts or enforcement challenges.

Drafting Commentary. We recommend cross-referencing the due diligence findings in the C&H Due Diligence Memorandum dated August 15, 2022, which identified several areas of operational complexity in TSL's multi-jurisdictional structure, including: (i) the absence of centralized treasury management software across all subsidiaries; (ii) differences in accounting policies between Maltese and Singapore GAAP as applied by certain subsidiaries; and (iii) limitations on the ability to upstream cash from the Dubai FZCO entity due to UAE regulatory requirements. These findings, while not individually material, collectively support the need for clear disclosure of multi-jurisdictional operational risk.

IV.E. Insurance and Casualty Risk

TSL maintains marine insurance coverage consistent with industry practice, including hull and machinery insurance, protection and indemnity ("P&I") insurance through the Stonefield Insurance, war risk insurance, loss of hire insurance, and cargo liability insurance. The risk factor as drafted addresses the risk that insurance coverage may be insufficient to cover all potential losses, that coverage for certain risks (such as war risk in the Black Sea) may become unavailable or prohibitively expensive, and that P&I Club calls (supplementary premium assessments) may increase materially.

The risk factor also notes the connection between insurance and the security package for the Notes: the Security Documents require an assignment of insurances for the 28 Collateral Vessels in favor of the Security Agent. If insurance coverage were to lapse, become unavailable, or become insufficient, this could impair the value of the collateral and the Security Agent's ability to enforce the security package.

Cross-reference: OM Business Description, "Insurance" (pages 130–131); OM "Description of the Notes — Security — Assignment of Insurances" (pages 200–203).

V. Category 3: Risks Related to the Fleet and Vessels

Category 3 addresses risks specific to TSL's fleet of 50 vessels. This category contains seven individual risk factors in the OM fourth draft, of which the four most significant are discussed below with drafting commentary. The remaining three risk factors in this category (relating to drydocking schedule risk, vessel operating cost inflation, and charterer damage to vessels) are adequately drafted and do not require material revision.

V.A. Vessel Concentration Risk

TSL's fleet consists of 50 vessels: 38 dry-bulk carriers (comprising Supramax, Ultramax, and Kamsarmax class vessels) and 12 container feeder vessels, with a total deadweight tonnage ("DWT") of approximately 2,850,000. The fleet is concentrated in mid-size dry-bulk segments, which creates vulnerability to segment-specific demand shifts. If demand for Supramax, Ultramax, or Kamsarmax-class tonnage were to decline disproportionately relative to other vessel segments (for example, due to a shift in cargo volumes toward larger Capesize or smaller Handysize vessels), TSL's utilization rates and charter rates could be adversely affected even if the broader dry-bulk market remained healthy.

A critical feature of TSL's fleet structure from the perspective of noteholders is that only 28 of the 50 vessels constitute Collateral Vessels under the Security Documents. The remaining 22 vessels are unencumbered by the Notes security package. While the earnings from all 50 vessels support TSL's overall creditworthiness and ability to service the Notes, only the earnings, insurances, and requisition compensation relating to the 28 Collateral Vessels are directly assigned to the Security Agent. The earnings from the 22 non-collateral vessels flow to TSL and its subsidiaries as general corporate assets.

Drafting Commentary. We recommend that the risk factor explicitly highlight the gap between the total fleet (50 vessels, appraised at approximately $1.82 billion) and the Collateral Vessels (28 vessels, appraised at approximately $1.175 billion). The difference of $645 million — representing 22 non-collateral vessels — is not directly securing the Notes. While the Indenture includes covenants that restrict TSL's ability to dispose of assets and incur additional debt, these are incurrence-based covenants (discussed in Section VI.C below) and do not prevent TSL from operating, redeploying, or (subject to covenant compliance) selling or encumbering non-collateral vessels in ways that could reduce their contribution to TSL's overall credit profile. The risk factor should make this distinction clear and should avoid creating the impression that the entire fleet secures the Notes. We note that Whitfield & Crane raised a similar comment on the first draft but the current fourth draft language could be further sharpened.

Cross-reference: OM Business Description, "Our Fleet" (pages 113–125); OM "Description of the Notes — Security" (pages 190–210).

V.B. Vessel Valuation Volatility

TSL's fleet was appraised as of June 2022 by Compass Marine Valuations Ltd. (Robert Hargreaves, Managing Director) at approximately $1.82 billion (total fleet) and $1.175 billion (28 Collateral Vessels), based on desktop valuations. Vessel values are highly correlated with charter rates and are themselves cyclical, often exhibiting greater volatility than charter rates due to the capitalization of future expected earnings into vessel prices.

The risk factor as drafted in the OM fourth draft addresses vessel valuation volatility in general terms and includes the collateral coverage ratio ("CCR") framework established by the Indenture. At issuance, the CCR is 2.94x ($1,175 million ÷ $400 million), which represents a substantial cushion above the maintenance covenant minimum of 2.00x. The CCR is tested semi-annually, based on independent desktop valuations obtained by the Issuers from an approved independent appraiser.

If the CCR falls below 2.00x, the Issuers are required to either (i) provide additional collateral (by designating additional vessels as Collateral Vessels and granting first-priority ship mortgages thereon) or (ii) prepay a portion of the Notes sufficient to restore the CCR to at least 2.00x. The CCR maintenance covenant is one of only two maintenance-based covenants in the Indenture (the other being the requirement to maintain the assignment of earnings and insurances on Collateral Vessels).

The OM fourth draft also notes the average vessel age of TSL's fleet: 9.2 years. With an economic life for dry-bulk carriers of typically 20–25 years, TSL's fleet has a remaining economic life of approximately 11–16 years on average. Fleet depreciation reduces vessel values over time independently of market cycles, and the combination of market-driven and age-driven depreciation could accelerate the erosion of collateral coverage.

Drafting Commentary. We recommend including quantitative sensitivity analysis on the CCR. As currently drafted, the risk factor states that vessel values "may decline" and that a breach of the 2.00x threshold would trigger additional collateral or prepayment obligations, but does not quantify the magnitude of decline that would trigger a breach. A straightforward calculation demonstrates that if Collateral Vessel values decline by approximately 32% from $1,175 million to approximately $800 million, the 2.00x threshold would be breached ($800M ÷ $400M = 2.00x). A decline of this magnitude is not implausible given historical vessel value cycles — during the 2008–2009 crisis, vessel values in the Supramax and Panamax segments declined by 60–70% from peak to trough. Even a moderate cyclical downturn of 30–40% from current levels (which are elevated by historical standards) could bring Collateral Vessel values into the range where CCR compliance becomes a concern. We recommend including a statement along the following lines: "A decline in the appraised value of the Collateral Vessels of approximately 32% from their June 2022 appraised value would result in a breach of the 2.00x collateral coverage ratio, requiring the Issuers to provide additional collateral or prepay a portion of the Notes."

Cross-reference: OM "Description of Collateral" (pages 190–210); OM "Certain Covenants — Collateral Coverage Ratio" (pages 225–228); Compass Marine Valuations Ltd. desktop appraisal (June 2022).

V.C. Vessel Age and Capital Expenditure Requirements

The average age of TSL's fleet of 9.2 years places the fleet approximately in the middle of its economic life. While a relatively young average age is generally viewed favorably by investors (reducing near-term obsolescence and regulatory compliance risk), it also implies substantial future capital expenditure requirements for ongoing drydocking, maintenance, and eventual fleet renewal.

Drydocking is required at approximately five-year intervals for each vessel under classification society rules, and each drydocking cycle involves significant cost (typically $1.5–3.0 million per vessel, depending on the vessel's size, age, and condition) and revenue loss (approximately 15–25 off-hire days per drydocking). With a fleet of 50 vessels, TSL can expect to drydock approximately 10 vessels per year on average, representing annual drydocking expenditures in the range of $15–30 million plus the associated revenue impact of off-hire days.

The OM fourth draft notes that $72 million of the net proceeds of the offering are allocated to general corporate purposes and fleet capital expenditures. The risk factor should ensure that investors understand that this allocation is expected to be consumed by ongoing maintenance and drydocking requirements over the near term and may not be sufficient to fund material fleet expansion or renewal without additional capital.

Cross-reference: OM Business Description, "Fleet Profile" (pages 113–118); OM "Use of Proceeds" (pages 20–21).

V.D. Flag State and Classification Society Risks

TSL's fleet is registered across multiple flag states, including Malta, the marshall Islands, Singapore, and others. Each flag state imposes its own regulatory requirements relating to vessel registration, safety standards, environmental compliance, and crewing. The risk factor addresses the risk that a vessel could lose its registration or fail to comply with flag-state requirements, which could affect its operability and, in the case of Collateral Vessels, its mortgageability.

Classification societies (such as Meridian Industries, Bureau Veritas, and the American Bureau of Shipping) establish and enforce technical standards for vessel construction, maintenance, and operation. Loss of classification could render a vessel uninsurable and inoperable, and could constitute an event of default under the Security Documents (which require Collateral Vessels to maintain classification with an approved classification society at all times).

A related risk is that the enforceability of ship mortgages depends on the law of the flag state in which the vessel is registered, as well as on the Singapore law governing the Security Documents. Different flag states have different rules governing the priority of ship mortgage liens relative to other maritime liens (such as crew wages, salvage, and port charges). In some jurisdictions, maritime liens for crew wages and salvage have priority over ship mortgage liens, which could reduce the recovery available to noteholders in an enforcement scenario.

Cross-reference: OM "Description of the Notes — Security — Ship Mortgages" (pages 193–198).

VI. Category 4: Risks Related to the Notes and the Offering Structure

Category 4 addresses risks inherent in the terms, structure, and legal framework of the Notes. This is the largest category in the OM, containing eleven individual risk factors. The eight most significant are discussed below with drafting commentary. The remaining three risk factors (relating to currency exchange risk on Notes denominated in USD, FATCA withholding, and the substitution of co-issuer provisions) are adequately drafted and do not require material revision.

VI.A. High-Yield Notes — General Risks

The Notes are high-yield, speculative-grade debt instruments. They have received preliminary ratings of B+ (stable outlook) from Polaris Ratings Group Ltd. (assigned August 8, 2022) and B1 (stable outlook) from Oceanic Credit Assessments Inc. (assigned August 10, 2022). These ratings reflect the rating agencies' assessment of the Issuers' ability to meet their payment obligations under the Notes, taking into account the credit profile of TSL and the terms of the Notes (including the security package).

The risk factor as drafted includes standard disclosure that ratings are not a recommendation to purchase, hold, or sell the Notes, that ratings may be downgraded, suspended, or withdrawn at any time, and that a downgrade or withdrawal of ratings could adversely affect the market price and liquidity of the Notes. The disclosure also notes that different rating agencies may assign different ratings to the Notes and that ratings assigned to the Notes may not reflect the potential impact of all risks relating to the Notes, the collateral, or the Issuers' business.

We have reviewed this risk factor against comparable precedents and believe it is adequately drafted. No material changes are recommended.

Cross-reference: OM "Ratings" (page 19).

VI.B. Refinancing and Liquidity Risk

The Notes mature on October 15, 2029, representing a seven-year tenor from the anticipated closing date. At maturity, the Issuers will be required to repay the entire $400 million principal amount of the Notes (together with any accrued and unpaid interest). There can be no assurance that the Issuers will have sufficient cash on hand or will be able to refinance the Notes at or prior to maturity on commercially acceptable terms, or at all.

The pro forma capital structure of TSL following the offering and the application of proceeds is as follows:

• Total pro forma debt: $400 million (Notes only, following the full refinancing of the existing $310 million of bilateral secured credit facilities with Meridian Maritime Bank AG ($190 million) and Clearwater Shipping Finance Ltd. ($120 million))

• Pro forma cash and cash equivalents: $58.3 million (estimated)

• Pro forma net debt: $341.7 million ($400M − $58.3M)

• Pro forma net leverage: 1.59x ($341.7M net debt ÷ $214.6M LTM Adjusted EBITDA)

• Pro forma annual interest expense: $35.0 million (8.750% coupon × $400M principal)

• Pro forma interest coverage: 6.13x ($214.6M LTM Adjusted EBITDA ÷ $35.0M annual interest expense)

While the pro forma credit metrics at closing are moderate by high-yield standards (1.59x net leverage and 6.13x interest coverage), they are heavily dependent on the elevated EBITDA levels achieved during the current market cycle. If EBITDA were to decline from current levels, leverage would increase and interest coverage would decline, potentially materially.

Drafting Commentary. We recommend emphasizing the sensitivity of credit metrics to EBITDA cyclicality. Specifically, ABS has shared with us its revised FY2023E Adjusted EBITDA estimate of approximately $128 million (down from the LTM figure of $214.6 million used in the pro forma calculations). If EBITDA were to decline to $128 million:

• Pro forma net leverage would increase from 1.59x to approximately 2.67x ($341.7M ÷ $128M) — still within the 3.50x incurrence covenant threshold but representing a significant deterioration from closing levels.

• Interest coverage would decline from 6.13x to approximately 3.66x ($128M ÷ $35M) — still providing reasonable debt service coverage but materially below the 6.13x level at closing.

This stress scenario is not hypothetical — it reflects the initial purchaser's own base-case estimate for FY2023 in light of declining freight rates. We believe it would be appropriate to include disclosure that acknowledges the sensitivity of leverage and coverage metrics to EBITDA performance, even if specific forward-looking projections are not included. This recommendation is discussed further in Section XI.A.

VI.C. Incurrence-Based Covenant Limitations

The Indenture contains a set of covenants that restrict the activities of the Issuers and their restricted subsidiaries. However, with the important exception of the collateral coverage ratio maintenance covenant (2.00x, tested semi-annually), the covenants in the Indenture are predominantly incurrence-based rather than maintenance-based.

This distinction is critical for investors to understand. Under an incurrence-based covenant framework, the relevant financial test (e.g., the Maximum Total Net Leverage Ratio of 3.50x) applies only at the time the Issuers seek to take a specified action (e.g., incur additional indebtedness). If the Issuers' financial condition subsequently deteriorates and their actual leverage exceeds 3.50x due to a decline in earnings (rather than an incurrence of additional debt), no default or event of default is triggered. The leverage ratio simply prevents the Issuers from incurring additional debt until their leverage returns below the threshold.

Similarly, the Restricted Payments covenant permits the Issuers to make restricted payments (including dividends and distributions to shareholders) up to the greater of $30 million and 10% of Consolidated Net Tangible Assets, subject to compliance with the incurrence-based leverage test. This basket provides the Issuers with significant flexibility to make distributions to the controlling shareholder even during periods of financial stress, provided that the relevant conditions were satisfied at the time of incurrence or commitment.

Investors therefore have limited covenant protection against business deterioration short of an actual payment default (failure to pay interest or principal when due) or a breach of the collateral coverage maintenance covenant (2.00x). In contrast, maintenance-based covenants — which are tested on a periodic basis regardless of whether the Issuers have taken any specific action — are more commonly found in bank credit facilities and provide lenders with earlier warning of, and remedies for, financial deterioration.

Drafting Commentary. This is standard disclosure for a high-yield offering, but it is important that it be presented clearly and prominently. We recommend including a brief contrast with maintenance-based covenants typical of bank loan facilities to help investors understand the practical significance of the incurrence-based framework. We should also ensure that the Restricted Payments basket is clearly described, including the conditions under which distributions may be made and the available capacity under the basket at closing.

Cross-reference: OM "Description of the Notes — Certain Covenants — Limitation on Indebtedness" (pages 228–234); OM "Description of the Notes — Certain Covenants — Limitation on Restricted Payments" (pages 234–240).

VI.D. Optional Redemption and Make-Whole Risk

The Notes are subject to optional redemption by the Issuers under the following call structure:

In addition, within 180 days of an initial public offering ("IPO") of TSL's equity securities, the Issuers may redeem up to 40% of the aggregate principal amount of the Notes at a redemption price of 108.750% of par (the "Equity Clawback").

The risk factor addresses the risk that the Notes may be redeemed at a time that is unfavorable to investors — for example, during a period of declining interest rates when investors would prefer to retain their investment in the higher-yielding Notes. In a make-whole scenario, the Treasury plus 50 basis points spread may not fully compensate investors for the lost yield, depending on market conditions at the time of redemption.

Cross-reference: OM "Description of the Notes — Optional Redemption" (pages 218–222).

VI.E. Change of Control

Upon the occurrence of a Change of Control (as defined in the Indenture), each holder of Notes has the right to require the Issuers to repurchase all or any portion of such holder's Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest.

A "Change of Control" is defined in the Indenture to include, among other things, any person or group (other than Dimitrios Kallistratos and his related persons, including KMH and members of the Kallistratos family) acquiring, directly or indirectly, more than 50% of the total voting power of the equity interests of TSL.

The risk factor addresses the risk that TSL may lack sufficient liquidity to fund a Change of Control offer if triggered. A Change of Control offer for 100% of the outstanding Notes would require the Issuers to fund approximately $404 million (101% × $400 million plus accrued interest), which could exceed TSL's available liquidity and borrowing capacity. In the event that the Issuers are unable to fund a Change of Control offer, a failure to consummate the offer would constitute an event of default under the Indenture.

Cross-reference: OM "Description of the Notes — Repurchase at the Option of Holders — Change of Control" (pages 222–225).

VI.F. Co-Issuer / SPV Structure

Thalassa Finance Pte. Ltd. ("TFPL"), UEN 202209345K, is a wholly-owned subsidiary of TSL incorporated in Singapore as a private company limited by shares. TFPL was established for the purpose of serving as co-issuer of the Notes and as the entity through which intercompany loan receivables are held and administered.

TFPL's sole director is Marina Demetriou, who also serves as CFO of TSL. TFPL has no employees, no independent operations, and no revenue-generating activities other than the receipt of intercompany loan interest from fleet-owning subsidiaries. TFPL holds aggregate intercompany loan receivables of $365 million, representing advances made to fleet-owning subsidiaries for the purpose of financing vessel acquisitions and operations. These intercompany loans are the principal assets of TFPL.

The ability of TFPL to meet its obligations as co-issuer under the Notes depends entirely on the receipt of intercompany cash flows from TSL's fleet-owning subsidiaries. If those subsidiaries were to default on their intercompany loan obligations to TFPL (whether due to financial distress, regulatory restrictions on dividend or interest payments, or otherwise), TFPL would lack the resources to service the Notes.

Drafting Commentary. We recommend ensuring that the OM disclosure adequately describes the SPV's dependence on intercompany cash flows and the flow-of-funds mechanics. The current fourth draft describes TFPL's role as co-issuer but could benefit from additional detail on: (i) the terms of the intercompany loans (maturity, interest rate, subordination); (ii) the assignment of the intercompany loan receivables to the Security Agent as part of the collateral package; and (iii) the risk that the intercompany loan interest rate may be subject to transfer pricing challenges by the Inland Revenue Authority of Singapore, which could affect the economics of the intercompany flow. This last point connects to the transfer pricing risk discussed in Section IX.C below.

Cross-reference: OM "Description of the Notes — The Issuers — Thalassa Finance Pte. Ltd." (pages 82–84).

VI.G. Transfer Restrictions and Liquidity of the Notes

The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes are being offered and sold only to qualified institutional buyers ("QIBs") in reliance on Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act.

The Notes will be issued in minimum denominations of $200,000 and integral multiples of $1,000 in excess thereof. The proposed ISINs are XS2498731056 (Regulation S Global Note) and US87265TAA10 (Rule 144A Global Note). The proposed CUSIP for the Rule 144A Global Note is 87265T AA1.

An application is expected to be made to list the Notes on the SGX-ST. However, there can be no assurance that the listing application will be approved or, if approved, that an active trading market for the Notes will develop or be sustained. High-yield notes sold in Rule 144A / Regulation S offerings typically have limited secondary market liquidity, particularly during periods of market stress, and holders may be unable to sell their Notes at their desired price or at all.

Cross-reference: OM "Transfer Restrictions" (pages 275–282) and "Plan of Distribution" (pages 283–290).

VI.H. Asset Sale Covenant

The Indenture requires that if the Issuers or any restricted subsidiary consummates an asset sale generating net proceeds in excess of $15 million per transaction (or series of related transactions), 100% of such net proceeds must be applied, within 365 days following the receipt thereof, to either (i) make an offer to repurchase Notes at par or (ii) reinvest such proceeds in assets useful in the Issuers' business (the "reinvestment exception"). If net proceeds are not so applied within the 365-day period, the Issuers are required to make an offer to repurchase Notes at par with the excess net proceeds.

The risk factor addresses the risk that asset sales may not generate sufficient proceeds to meaningfully reduce the outstanding principal of the Notes, and that the reinvestment exception may be used broadly to avoid mandatory repurchase offers. The reinvestment exception is defined to permit reinvestment in any assets (including vessels) useful in the Issuers' business, which provides the Issuers with significant discretion to reinvest asset sale proceeds without repurchasing Notes.

Cross-reference: OM "Description of the Notes — Certain Covenants — Asset Sales" (pages 240–244).

VII. Category 5: Risks Related to the Security Package and Collateral

Category 5 addresses risks associated with the security package securing the Notes. This category contains six individual risk factors in the OM fourth draft. The four most significant are discussed below with drafting commentary. The remaining two (relating to the risk of vessel arrest by third parties and the risk of impairment of collateral value due to environmental contamination) are adequately drafted and do not require material revision.

VII.A. Collateral Coverage and Enforcement Limitations

The security package for the Notes consists of the following:

• First-priority ship mortgages over 28 Collateral Vessels (appraised at $1.175 billion as of June 2022 by Compass Marine Valuations Ltd.)

• Assignment of earnings generated by the 28 Collateral Vessels (including hire, freight, demurrage, and other payments receivable by the Issuers or the fleet-owning guarantor subsidiaries in respect of the Collateral Vessels)

• Assignment of insurances covering the 28 Collateral Vessels (including hull and machinery, P&I, war risk, and loss of hire insurance)

• Assignment of requisition compensation payable in respect of the 28 Collateral Vessels

• Pledge of 100% of the equity in TFPL and in each of the four fleet-owning guarantor subsidiaries

• Assignment of $365 million of intercompany loan receivables held by TFPL against the fleet-owning subsidiaries

Atlas Collateral Agency Pte. Ltd. (UEN 200115678R) serves as Security Agent under the Security Documents and holds the security for the benefit of the noteholders.

The risk factor as drafted addresses several practical limitations on enforcement of the security package. Ship arrest and judicial sale processes vary significantly by jurisdiction and flag state. The enforcement of ship mortgages requires the arrest of vessels in a jurisdiction that recognizes the mortgage and provides a judicial sale mechanism. The time required to arrest a vessel, obtain a judicial sale order, and distribute the proceeds can range from several months to over a year, depending on the jurisdiction, and can involve substantial legal costs. During the enforcement period, the vessel may continue to depreciate in value, may be subject to operating costs and maintenance requirements, and may be subject to competing claims.

Competing claims that may have priority over ship mortgage liens in certain jurisdictions include maritime liens for crew wages, salvage, collision damage, port charges, and pilotage fees. Under the International Convention on Maritime Liens and Mortgages (1993) and the domestic law of many flag states, maritime liens for crew wages and salvage are accorded priority over registered ship mortgage liens. This means that in an enforcement scenario, the proceeds of a judicial sale of a Collateral Vessel may first be applied to satisfy maritime liens before any distribution is made to noteholders.

Drafting Commentary. We recommend including disclosure on (i) the potential for significant delays in enforcement, including jurisdictional disputes over the appropriate forum for arrest and sale, (ii) the possibility that competing claims (including maritime liens for crew wages, port charges, and salvage) may reduce recoveries available to noteholders, and (iii) the risk that the aggregate value of the Collateral Vessels at the time of enforcement may be significantly less than their current appraised value of $1.175 billion, due to vessel value cyclicality, depreciation, and the impact of distressed sale conditions. The current fourth draft addresses these risks but could benefit from more specific disclosure regarding the variability of enforcement outcomes across jurisdictions.

Cross-reference: OM "Description of the Notes — Security" (pages 190–210).

VII.B. Intercreditor Agreement and Priority

The Intercreditor Agreement governs the priority and enforcement mechanics among the Security Agent, th

MEMORANDUM
TO: Robert Adeyemi, Responsible Partner, Capital Markets, Calderwood & Harkness LLP
FROM: Brendan Walsh, Lead Associate, Capital Markets; Natasha Forbes, Working Associate, Capital Markets
DATE: September 10, 2022
RE: Risk Factors Drafting Memorandum — Offering Memorandum (4th Draft, dated September 12, 2022) for $400,000,000 Senior Secured Notes due 2029 issued by Thalassa Shipping & Logistics SA and Thalassa Finance Pte. Ltd.
Matter No.: 1044-00004
Client No.: 80214-TSL
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for internal use only. It is protected by the attorney-client privilege and the work product doctrine. It is not intended for distribution to, nor should it be shared with, the client, counterparties, underwriters, rating agencies, or any third party without the prior written authorization of the Responsible Partner. Any inadvertent disclosure does not constitute a waiver of privilege.
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I. Purpose and Scope
This memorandum has been prepared for internal Calderwood & Harkness LLP use to analyze, categorize, and provide detailed drafting commentary on the risk factors included in the near-final fourth draft of the Offering Memorandum (the "OM"), dated September 12, 2022, for the $400,000,000 aggregate principal amount of Senior Secured Notes due 2029 (the "Notes") to be co-issued by Thalassa Shipping & Logistics SA ("TSL" or the "Company") and Thalassa Finance Pte. Ltd. ("TFPL," and together with TSL, the "Issuers").
Purpose. The primary purpose of this memorandum is to provide the Calderwood & Harkness deal team with a comprehensive assessment of the completeness, accuracy, and adequacy of the risk factors section of the OM. The memorandum identifies areas where existing disclosure is sufficient, areas where modifications or enhancements are warranted, and areas where additional disclosure should be considered before the OM is finalized and circulated to investors. The memorandum also provides drafting commentary intended to guide revisions to the risk factors in the fifth and anticipated final draft of the OM.
Scope. This memorandum covers all risk factor categories included in the OM, organized according to the seven-category taxonomy adopted in the fourth draft. It provides cross-references to the business description, financial data, and other substantive sections of the OM, identifies areas where additional disclosure may be warranted, and flags coordination points with other workstreams, including the due diligence memorandum, the comfort letter request, and the 10b-5 negative assurance process.
Audience. This memorandum is intended solely for the internal Calderwood & Harkness team working on the TSL offering, including Robert Adeyemi (Responsible Partner), Brendan Walsh (Lead Associate), Natasha Forbes (Working Associate), and other members of the Capital Markets practice group who may be assigned to the matter. It is expressly not for distribution to the client (Thalassa Shipping & Logistics SA), any issuer or guarantor entity, Anchor Bay Securities LLC ("ABS," the initial purchaser), Whitfield & Crane LLP (issuer's counsel), the rating agencies, or any other third party.
Drafting History and Context. The first draft of the OM was circulated by Calderwood & Harkness on July 11, 2022. Whitfield & Crane LLP (Thomas Whitfield III, lead partner; Rebecca Samuels, lead associate) provided initial comments on behalf of the Issuers on July 18, 2022. Those comments principally addressed the business description and the description of the Notes, but also included substantive comments on several risk factors, particularly those relating to the controlling shareholder structure, the collateral package, and the Greek tonnage tax regime. ABS (Priya Subramanian, Managing Director; Marcus Reinhardt, Vice President) provided underwriter comments on July 25, 2022, which focused on market-facing disclosure adequacy and comparability with recent shipping high-yield precedents. Second and third drafts were circulated on August 5, 2022 and August 22, 2022, respectively. The current fourth draft, dated September 12, 2022, is substantially agreed among all parties, subject to the open items and recommendations identified in this memorandum.
10b-5 Negative Assurance Letter. It is important to note that Whitfield & Crane LLP, as issuer's counsel, will deliver a 10b-5 negative assurance letter at closing. That letter will state that, based on their participation in the preparation of the OM and subject to customary qualifications, nothing has come to their attention that causes them to believe that the OM contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The completeness and adequacy of the risk factors section is critical to supporting the delivery of that letter. Accordingly, any gaps or deficiencies identified in this memorandum should be addressed before the OM is finalized.
Offering Structure. For reference, the offering is structured as a Rule 144A / Regulation S offering of global notes, with settlement through the facilities of The Depository Trust Company ("DTC") for 144A notes and Stonefield Industries and Harborview Industries for Regulation S notes. The Indenture, the Security Documents, and the Intercreditor Agreement are governed by Singapore law. The Notes will be listed on the Singapore Exchange Securities Trading Limited ("SGX-ST"), subject to completion of the listing application process. Atlas Collateral Agency Pte. Ltd. serves as Security Agent and Meridian Trustees Pte. Ltd. serves as Indenture Trustee.
II. Risk Factor Taxonomy and Organization
The risk factors in the OM fourth draft are organized into seven principal categories, which were established in the first draft and have remained consistent through subsequent revisions. This organizational framework follows SEC and market convention for high-yield offering memoranda, presenting risks from the broadest (industry-level) to the most specific (tax and jurisdictional), and presenting the most material risks first within each category.
The seven categories are:
1. Risks Related to the Shipping Industry and Freight Markets — addressing macro-level industry risks that affect TSL's operating environment, including cyclicality, charter rate volatility, vessel supply dynamics, and global trade conditions.
2. Risks Related to TSL's Business and Operations — addressing company-specific business risks, including revenue concentration, key personnel dependence, controlling shareholder structure, operational complexity, and insurance coverage.
3. Risks Related to the Fleet and Vessels — addressing risks specific to TSL's fleet of 50 vessels, including vessel concentration, valuation volatility, age and capital expenditure requirements, and flag state and classification matters.
4. Risks Related to the Notes and the Offering Structure — addressing risks inherent in the terms and structure of the Notes, including their speculative-grade nature, refinancing risk, covenant limitations, optional redemption provisions, and transfer restrictions.
5. Risks Related to the Security Package and Collateral — addressing risks associated with the collateral securing the Notes, including enforcement limitations, intercreditor mechanics, guarantor and structural subordination risks, and the distinction between collateral and non-collateral vessels.
6. Risks Related to Environmental, Regulatory, and Compliance Matters — addressing regulatory risks, including IMO sulphur regulations, EU ETS inclusion, ballast water management, and sanctions and anti-corruption compliance.
7. Risks Related to Tax and Jurisdictional Matters — addressing tax risks associated with TSL's multi-jurisdictional structure and the Singapore law governing the transaction documents.
The ordering of risks within each category follows the convention of presenting the most material risks first. Within Category 1, for example, shipping industry cyclicality and the Baltic Dry Index are presented before vessel supply dynamics, reflecting TSL management's and ABS's view that cyclicality is the most significant industry-level risk. Within Category 4, refinancing and liquidity risk is presented before the more technical covenant limitation disclosures.
The risk factors section as currently drafted spans pages 22 through 78 of the OM fourth draft (approximately 56 pages), which is broadly consistent with comparable shipping high-yield offerings reviewed by the team (see Appendix B). The section contains a total of 41 individual risk factors distributed across the seven categories. A detailed index of each individual risk factor, with page references and short-form titles, is provided in Appendix A.
We note that the ordering and organization have been reviewed and approved by ABS (Priya Subramanian) and by Whitfield & Crane (Rebecca Samuels) without material objection. The principal open items relate to the substance and specificity of certain individual risk factors, rather than to the overall organizational framework.
Cross-reference: OM 4th Draft, pages 22–78 (Risk Factors section).
III. Category 1: Risks Related to the Shipping Industry and Freight Markets
Category 1 encompasses macro-level risks affecting the shipping industry and the freight markets in which TSL operates. This category contains eight individual risk factors in the OM fourth draft, of which the four most significant are discussed below with drafting commentary. The remaining four risk factors in this category (relating to seasonal demand fluctuations, bunker fuel price volatility, piracy and security threats, and port congestion and infrastructure constraints) are adequately drafted in the fourth draft and do not require material revision, subject to the general observations noted in Section XI of this memorandum.
III.A. Shipping Industry Cyclicality and the Baltic Dry Index
The dry-bulk and container feeder shipping industries are highly cyclical, driven by fluctuations in global commodity demand, trade volumes, vessel supply, and macroeconomic conditions. TSL's revenue and earnings are significantly correlated with the Baltic Dry Index ("BDI"), which is the most widely followed composite measure of dry-bulk shipping rates.
The OM fourth draft includes disclosure of TSL's financial performance in the context of current market conditions. At Q1 2022 annualized levels, TSL's last-twelve-months ("LTM") Revenue was $687.4 million and LTM Adjusted EBITDA was $214.6 million, representing a 31.2% Adjusted EBITDA margin. These results were achieved during a period when the BDI was at approximately 3,400 — a level that is historically elevated and significantly above the long-term average.
The OM includes a discussion of historical BDI volatility, referencing the well-known period of extreme decline during the 2008–2009 global financial crisis, when the BDI fell from over 11,000 in May 2008 to below 700 by December 2008, representing a decline in excess of 93% in approximately seven months. The OM also references subsequent periods of weakness, including the BDI trough in February 2016 (approximately 290), and the recovery to the 2,000–3,500 range during 2021–2022.
BDI sensitivity is particularly acute for TSL's 38 dry-bulk carriers, which include vessels in the Supramax, Ultramax, and Kamsarmax classes. These mid-size segments are directly benchmarked to the BDI and its component sub-indices (the Baltic Supramax Index and the Baltic Panamax Index). TSL's 12 container feeder vessels are less directly correlated with the BDI but are subject to analogous cyclical dynamics in the container feeder market.
Drafting Commentary. We recommend enhancing this risk factor with specific quantitative sensitivity disclosure. As currently drafted, the risk factor describes the cyclicality of the shipping industry and the BDI in general terms and references historical volatility, but it does not quantify the potential impact on TSL's earnings or credit metrics. Given the current trajectory of the BDI post-May 2022 (the BDI has declined from approximately 3,400 in early 2022 to approximately 1,700 as of the date of this memorandum), we believe it would be appropriate and prudent to include illustrative sensitivity analysis. Specifically, we recommend disclosure along the following lines: a 40–55% decline in charter rates from current levels (which is within the range of historical cyclical declines) could compress Adjusted EBITDA materially, potentially to levels in the range of $100–$130 million, with corresponding increases in net leverage and decreases in interest coverage. This disclosure is directly relevant to investors' assessment of the Notes' credit profile and is consistent with market practice in recent comparable shipping high-yield offerings (see Appendix B, noting that the Argonaut Maritime 2021 offering and the Oceanus Bulkers 2022 offering both included quantitative BDI sensitivity tables). We discuss this recommendation further in Section XI.A.
Cross-reference: OM Business Description, "Industry Overview" (pages 98–112) and "Our Fleet" (pages 113–125).
III.B. Charter Rate Volatility
TSL derives its revenue from three principal chartering arrangements: time charters, voyage charters, and contracts of affreightment ("COAs"). Each of these arrangements exposes TSL to charter rate volatility, although the nature and timing of the exposure differs among them. Time charters provide fixed daily hire rates for the duration of the charter period, mitigating short-term rate volatility but exposing TSL to the risk that rates available at the expiration of existing charters may be materially lower than current contractual rates. Voyage charters and COAs expose TSL to spot-market rate fluctuations on a voyage-by-voyage or shipment-by-shipment basis.
Charter rates are influenced by a complex interplay of factors, including the supply/demand balance in each vessel segment, global and regional trade volumes, commodity prices and production patterns, seasonal factors (including the impact of crop harvesting cycles on grain trade and winter heating demand on coal trade), weather patterns, and the size of the newbuild orderbook. Changes in any of these factors can result in rapid and material changes in charter rates.
The risk factor as currently drafted in the OM fourth draft addresses these dynamics in general terms. The disclosure includes a discussion of TSL's charter portfolio, noting that as of June 30, 2022, approximately 55% of TSL's available vessel days were committed under time charters with a weighted average remaining duration of approximately 14 months, while the remaining 45% were exposed to the spot market through voyage charters and COAs.
TSL's 12 container feeder vessels face related but distinct risks. These vessels operate primarily in the Eastern Mediterranean, Black Sea, and Southeast Asia trade lanes, where container feeder volumes are driven by mainline container trade volumes and transshipment hub activity at key ports such as Piraeus, Istanbul, and Singapore. Container feeder rates have historically exhibited somewhat different cyclical patterns than dry-bulk rates, but have been subject to comparable volatility during periods of market stress.
Drafting Commentary. We recommend ensuring that the disclosure addresses both spot and period charter exposure with specificity. The current fourth draft does not separately quantify the revenue attributable to each charter type (time charter, voyage charter, COA), which would be useful for investors seeking to assess the magnitude and timing of TSL's exposure to rate movements. We also recommend cross-referencing the fleet employment profile in the business description, which provides vessel-by-vessel charter information, to ensure consistency between the risk factor disclosure and the business description data.
Cross-reference: OM Business Description, "Our Fleet — Charter Portfolio" (pages 118–125); OM Financial Data, "Revenue by Charter Type" (pages 148–150).
III.C. Vessel Supply and Newbuilding Overhang
The global fleet of dry-bulk carriers and container feeder vessels is subject to supply-side dynamics that can materially affect charter rates and vessel values. An oversupply of vessels in the global fleet, whether resulting from the delivery of newbuild orders, reductions in scrapping rates, or decreases in demand, can depress charter rates and vessel values for extended periods. The risk factor as currently drafted in the OM fourth draft discusses the current state of the dry-bulk and container feeder orderbooks and the potential impact of future deliveries on fleet supply.
The newbuild orderbook as a percentage of the existing fleet is a key indicator of future supply growth. The OM fourth draft cites data from Camberwell Management Consulting indicating that the dry-bulk orderbook stood at approximately 7.2% of the existing fleet as of June 2022, which is relatively low by historical standards but represents a meaningful increase from the cyclical low of approximately 5.8% reached in late 2020. For container feeder vessels, the orderbook is significantly higher as a percentage of the existing fleet, reflecting the ordering wave driven by elevated container freight rates during 2021–2022.
The connection between newbuild deliveries and future vessel supply is well understood but the timing and magnitude of the impact are uncertain and depend on factors including shipyard delivery schedules, order cancellations, scrapping rates for older vessels, and regulatory changes (such as energy efficiency requirements) that may accelerate fleet renewal or retirement.
The risk factor also addresses the impact of fleet oversupply on TSL's ability to maintain fleet utilization rates. TSL achieved fleet utilization of approximately 96.3% in the twelve months ended June 30, 2022, but utilization rates are sensitive to market conditions and can decline rapidly during periods of weak demand or oversupply.
Cross-reference: OM Business Description, "Industry Overview — Fleet Supply Dynamics" (pages 104–108).
III.D. Global Trade and Macroeconomic Conditions
TSL's primary trade lanes — the Eastern Mediterranean, the Black Sea, and Southeast Asia — are sensitive to geopolitical disruptions, sanctions regimes, and regional economic conditions. The OM fourth draft includes a general discussion of macroeconomic risks and their impact on global trade, including references to GDP growth rates, industrial production indices, and commodity demand trends.
The Black Sea trade lane is specifically exposed to conflict-related disruption. The ongoing military conflict between Russia and Ukraine, which commenced in February 2022, has materially affected Black Sea shipping, including the suspension of grain exports from Ukrainian ports, disruption to Russian commodity exports (including iron ore, steel products, and petroleum products), increased war risk insurance premiums, and heightened regulatory scrutiny of vessels calling at Black Sea ports. TSL has historically derived a meaningful portion of its dry-bulk revenue from Black Sea trade, including grain and minor bulk cargoes loaded at Ukrainian and Russian ports.
Commodity demand patterns drive dry-bulk demand. Iron ore, coal, and grain are the three largest commodities by volume in the global dry-bulk trade, and demand for these commodities is in turn driven by steel production (principally in China and India), power generation, and agricultural consumption. Minor bulk commodities (including fertilizers, forest products, and aggregates) also contribute to dry-bulk demand and are subject to their own cyclical and seasonal patterns.
Container feeder volumes are dependent on mainline container trade volumes and transshipment hub activity. The Eastern Mediterranean feeder market is anchored by the transshipment hub at Piraeus, operated by Marlowe Holdings, and by the Istanbul transshipment complex. The Southeast Asia feeder market is anchored by Singapore, the world's largest transshipment hub by TEU volume. Disruptions to mainline trade flows or changes in transshipment patterns could materially affect container feeder demand in TSL's trade lanes.
Drafting Commentary. The current geopolitical risk disclosure in the OM fourth draft is somewhat generic in its treatment of Black Sea-related risks. We recommend enhancing the disclosure with specific reference to the ongoing conflict and its observed and potential impacts on TSL's operations, including: (i) the percentage of TSL's revenue historically derived from Black Sea trade lanes; (ii) the impact of the conflict on war risk insurance premiums and the availability of cover; (iii) the potential for further sanctions on Russian trade that could affect TSL's Black Sea operations; and (iv) the impact on grain trade flows following the Black Sea Grain Initiative (the "grain corridor" agreement brokered by the United Nations and Turkey in July 2022, which remains fragile and subject to renewal). This recommendation is discussed further in Section XI.C.
Cross-reference: OM Business Description, "Industry Overview — Trade Lanes and Commodity Demand" (pages 108–112).
IV. Category 2: Risks Related to TSL's Business and Operations
Category 2 encompasses risks specific to TSL's business, corporate structure, and operations. This category contains nine individual risk factors in the OM fourth draft, of which the five most significant are discussed below with drafting commentary. The remaining four risk factors in this category (relating to competition, technological disruption, labor relations and seafarer availability, and litigation and dispute risks) are adequately drafted in the fourth draft and do not require material revision.
IV.A. Revenue Concentration and Customer Dependence
TSL derives a significant portion of its revenue from a limited number of charterer counterparties. The OM fourth draft discloses that TSL's top five charterers accounted for approximately 38% of total revenue in the twelve months ended June 30, 2022, and that no single charterer accounted for more than 12% of total revenue during that period. While this level of concentration is not unusual for a shipping company of TSL's size, it creates meaningful counterparty credit risk — the default or insolvency of one or more major charterers could materially reduce TSL's revenue and cash flow.
The risk factor addresses the creditworthiness of TSL's charterer counterparties, noting that many of TSL's counterparties are commodity traders, mining companies, and regional shipping lines whose financial condition may be volatile and whose creditworthiness may deteriorate during periods of commodity price weakness or market stress. The OM includes disclosure that TSL does not publicly identify its major charterers by name, citing competitive sensitivity, but provides aggregate data on revenue concentration and counterparty credit quality.
Cross-reference: OM Business Description, "Our Customers" (pages 126–130).
IV.B. Dependence on Key Personnel
TSL was founded in 1997 by the Kallistratos family and has been led by family members since its inception. Dimitrios Kallistratos, the founder and Chairman, is 68 years old and has over 40 years of experience in the shipping industry. His daughter, Elena Kallistratos-Pavlou, serves as Vice Chairwoman and oversees fleet management, including vessel acquisition and disposal decisions, commercial management, and technical operations. The involvement of the Kallistratos family in the day-to-day management and strategic direction of TSL is deeply embedded in the company's operating model and corporate culture.
Spyros Andreou, the Chief Executive Officer, joined TSL in 2015 from Drayton Consulting Group, where he was a partner in the transportation and logistics practice. Andreou is credited with implementing TSL's diversification into container feeder operations, its expansion into the Southeast Asia trade lane, and its development of the integrated port logistics and freight-forwarding business. His strategic vision is considered critical to TSL's growth trajectory and market positioning.
Marina Demetriou, the Chief Financial Officer, is the sole director of Thalassa Finance Pte. Ltd. (the Singapore-incorporated co-issuer) and plays a central role in TSL's financial management, treasury operations, and capital markets strategy. She is the primary point of contact for the offering process and has been instrumental in structuring the Notes, negotiating covenant terms, and managing relationships with the rating agencies and the initial purchaser.
The risk factor as drafted addresses the risk of loss of key personnel and the challenges associated with family governance transition. It notes that TSL does not maintain key-person insurance on Dimitrios Kallistratos, Elena Kallistratos-Pavlou, or Spyros Andreou.
Drafting Commentary. We recommend emphasizing that Dimitrios Kallistratos is not only the Chairman and founder of TSL but also the 100% beneficial owner of Kallistratos Maritime Holdings Ltd. ("KMH"), the BVI holding company that is the 72.5% controlling shareholder of TSL. The succession risk is therefore not limited to management continuity — it extends to the ownership and control structure of TSL itself. In the event of Dimitrios Kallistratos's incapacity or death, the disposition of his interest in KMH (and therefore his indirect controlling interest in TSL) would be governed by his personal estate planning arrangements, which are not disclosed in the OM and are not subject to any contractual restrictions under the Indenture. This creates a risk that the controlling interest in TSL could pass to individuals who may not have the same commitment to, or competence in, the shipping business, or that disputes among heirs could disrupt TSL's governance and operations. We should discuss with Whitfield & Crane whether additional disclosure on this point is appropriate, bearing in mind that this is a sensitive topic for the Kallistratos family.
IV.C. Controlling Shareholder Risk
TSL's equity ownership is concentrated in Kallistratos Maritime Holdings Ltd. (BVI), which holds 72.5% of TSL's issued and outstanding shares. Dimitrios Kallistratos is the sole beneficial owner of KMH. Pelagos Capital Partners Fund III LP, a Cayman Islands-domiciled private equity fund managed by Pelagos Capital Management Ltd. (Andreas Vournas, Managing Partner), holds 18.0% of TSL's shares and has the right to nominate two of TSL's seven board members. The remaining 9.5% of TSL's shares are held by the management Employee Share Ownership Plan ("ESOP") trust.
The risk factor as drafted addresses several dimensions of controlling shareholder risk:
• Divergent Interests. The controlling shareholder may have interests that diverge from those of noteholders. For example, the controlling shareholder may prefer to maximize equity distributions, retain earnings for future equity investments outside of TSL, or approve related-party transactions that benefit the Kallistratos family at the expense of TSL's credit profile.
• blocking Power. The controlling shareholder, by virtue of its 72.5% voting stake, has the ability to approve or block virtually all fundamental corporate actions, including mergers, acquisitions, dispositions, capital raises, and amendments to TSL's articles of association. This includes the ability to approve transactions that could be detrimental to noteholders, such as the sale of substantial assets or the incurrence of additional debt (subject to covenant limitations under the Indenture).
• Pelagos Capital Board Representation. While Pelagos Capital has board representation (2 of 7 seats), it does not have sufficient board representation or voting power to block actions approved by the controlling shareholder. The Pelagos Capital board members (Andreas Vournas and one additional nominee) may provide an independent perspective, but they do not constitute a controlling or blocking minority.
• ESOP Trust. The management ESOP trust holds 9.5% of TSL's shares but does not exercise independent governance rights; the trustee is designated by the board (which is controlled by the controlling shareholder).
Cross-reference: OM "Principal Shareholders" (pages 131–134) and "Related Party Transactions" (pages 135–142).
IV.D. Integration and Operational Risks
TSL operates an integrated business model that encompasses vessel operations (dry-bulk and container feeder), port logistics services, and freight-forwarding operations. While this integrated model provides diversification of revenue streams and potential operational synergies, it also creates operational complexity and execution risk.
TSL's operations span multiple jurisdictions, including Greece (headquarters and principal place of management), Singapore (co-issuer and freight-forwarding subsidiary), Malta (dry-bulk fleet-owning subsidiary), marshall Islands (container feeder fleet-owning subsidiary), and Dubai/UAE (port services subsidiary). Each jurisdiction has its own regulatory regime, corporate law framework, tax system, and legal infrastructure. The coordination of operations across these jurisdictions requires significant management attention and creates risks related to regulatory compliance, information flows, cash management, and governance.
The four guarantor subsidiaries — Thalassa Dry Bulk Operations Ltd. (Malta), Thalassa Container Feeder Ltd. (Marshall Islands), Thalassa Port Services FZCO (Dubai), and Thalassa Freight Solutions Pte. Ltd. (Singapore) — are organized under four different legal systems and are subject to different regulatory regimes. This creates complexity in the security and guarantee structure and increases the risk of jurisdictional conflicts or enforcement challenges.
Drafting Commentary. We recommend cross-referencing the due diligence findings in the C&H Due Diligence Memorandum dated August 15, 2022, which identified several areas of operational complexity in TSL's multi-jurisdictional structure, including: (i) the absence of centralized treasury management software across all subsidiaries; (ii) differences in accounting policies between Maltese and Singapore GAAP as applied by certain subsidiaries; and (iii) limitations on the ability to upstream cash from the Dubai FZCO entity due to UAE regulatory requirements. These findings, while not individually material, collectively support the need for clear disclosure of multi-jurisdictional operational risk.
IV.E. Insurance and Casualty Risk
TSL maintains marine insurance coverage consistent with industry practice, including hull and machinery insurance, protection and indemnity ("P&I") insurance through the Stonefield Insurance, war risk insurance, loss of hire insurance, and cargo liability insurance. The risk factor as drafted addresses the risk that insurance coverage may be insufficient to cover all potential losses, that coverage for certain risks (such as war risk in the Black Sea) may become unavailable or prohibitively expensive, and that P&I Club calls (supplementary premium assessments) may increase materially.
The risk factor also notes the connection between insurance and the security package for the Notes: the Security Documents require an assignment of insurances for the 28 Collateral Vessels in favor of the Security Agent. If insurance coverage were to lapse, become unavailable, or become insufficient, this could impair the value of the collateral and the Security Agent's ability to enforce the security package.
Cross-reference: OM Business Description, "Insurance" (pages 130–131); OM "Description of the Notes — Security — Assignment of Insurances" (pages 200–203).
V. Category 3: Risks Related to the Fleet and Vessels
Category 3 addresses risks specific to TSL's fleet of 50 vessels. This category contains seven individual risk factors in the OM fourth draft, of which the four most significant are discussed below with drafting commentary. The remaining three risk factors in this category (relating to drydocking schedule risk, vessel operating cost inflation, and charterer damage to vessels) are adequately drafted and do not require material revision.
V.A. Vessel Concentration Risk
TSL's fleet consists of 50 vessels: 38 dry-bulk carriers (comprising Supramax, Ultramax, and Kamsarmax class vessels) and 12 container feeder vessels, with a total deadweight tonnage ("DWT") of approximately 2,850,000. The fleet is concentrated in mid-size dry-bulk segments, which creates vulnerability to segment-specific demand shifts. If demand for Supramax, Ultramax, or Kamsarmax-class tonnage were to decline disproportionately relative to other vessel segments (for example, due to a shift in cargo volumes toward larger Capesize or smaller Handysize vessels), TSL's utilization rates and charter rates could be adversely affected even if the broader dry-bulk market remained healthy.
A critical feature of TSL's fleet structure from the perspective of noteholders is that only 28 of the 50 vessels constitute Collateral Vessels under the Security Documents. The remaining 22 vessels are unencumbered by the Notes security package. While the earnings from all 50 vessels support TSL's overall creditworthiness and ability to service the Notes, only the earnings, insurances, and requisition compensation relating to the 28 Collateral Vessels are directly assigned to the Security Agent. The earnings from the 22 non-collateral vessels flow to TSL and its subsidiaries as general corporate assets.
Drafting Commentary. We recommend that the risk factor explicitly highlight the gap between the total fleet (50 vessels, appraised at approximately $1.82 billion) and the Collateral Vessels (28 vessels, appraised at approximately $1.175 billion). The difference of $645 million — representing 22 non-collateral vessels — is not directly securing the Notes. While the Indenture includes covenants that restrict TSL's ability to dispose of assets and incur additional debt, these are incurrence-based covenants (discussed in Section VI.C below) and do not prevent TSL from operating, redeploying, or (subject to covenant compliance) selling or encumbering non-collateral vessels in ways that could reduce their contribution to TSL's overall credit profile. The risk factor should make this distinction clear and should avoid creating the impression that the entire fleet secures the Notes. We note that Whitfield & Crane raised a similar comment on the first draft but the current fourth draft language could be further sharpened.
Cross-reference: OM Business Description, "Our Fleet" (pages 113–125); OM "Description of the Notes — Security" (pages 190–210).
V.B. Vessel Valuation Volatility
TSL's fleet was appraised as of June 2022 by Compass Marine Valuations Ltd. (Robert Hargreaves, Managing Director) at approximately $1.82 billion (total fleet) and $1.175 billion (28 Collateral Vessels), based on desktop valuations. Vessel values are highly correlated with charter rates and are themselves cyclical, often exhibiting greater volatility than charter rates due to the capitalization of future expected earnings into vessel prices.
The risk factor as drafted in the OM fourth draft addresses vessel valuation volatility in general terms and includes the collateral coverage ratio ("CCR") framework established by the Indenture. At issuance, the CCR is 2.94x ($1,175 million ÷ $400 million), which represents a substantial cushion above the maintenance covenant minimum of 2.00x. The CCR is tested semi-annually, based on independent desktop valuations obtained by the Issuers from an approved independent appraiser.
If the CCR falls below 2.00x, the Issuers are required to either (i) provide additional collateral (by designating additional vessels as Collateral Vessels and granting first-priority ship mortgages thereon) or (ii) prepay a portion of the Notes sufficient to restore the CCR to at least 2.00x. The CCR maintenance covenant is one of only two maintenance-based covenants in the Indenture (the other being the requirement to maintain the assignment of earnings and insurances on Collateral Vessels).
The OM fourth draft also notes the average vessel age of TSL's fleet: 9.2 years. With an economic life for dry-bulk carriers of typically 20–25 years, TSL's fleet has a remaining economic life of approximately 11–16 years on average. Fleet depreciation reduces vessel values over time independently of market cycles, and the combination of market-driven and age-driven depreciation could accelerate the erosion of collateral coverage.
Drafting Commentary. We recommend including quantitative sensitivity analysis on the CCR. As currently drafted, the risk factor states that vessel values "may decline" and that a breach of the 2.00x threshold would trigger additional collateral or prepayment obligations, but does not quantify the magnitude of decline that would trigger a breach. A straightforward calculation demonstrates that if Collateral Vessel values decline by approximately 32% from $1,175 million to approximately $800 million, the 2.00x threshold would be breached ($800M ÷ $400M = 2.00x). A decline of this magnitude is not implausible given historical vessel value cycles — during the 2008–2009 crisis, vessel values in the Supramax and Panamax segments declined by 60–70% from peak to trough. Even a moderate cyclical downturn of 30–40% from current levels (which are elevated by historical standards) could bring Collateral Vessel values into the range where CCR compliance becomes a concern. We recommend including a statement along the following lines: "A decline in the appraised value of the Collateral Vessels of approximately 32% from their June 2022 appraised value would result in a breach of the 2.00x collateral coverage ratio, requiring the Issuers to provide additional collateral or prepay a portion of the Notes."
Cross-reference: OM "Description of Collateral" (pages 190–210); OM "Certain Covenants — Collateral Coverage Ratio" (pages 225–228); Compass Marine Valuations Ltd. desktop appraisal (June 2022).
V.C. Vessel Age and Capital Expenditure Requirements
The average age of TSL's fleet of 9.2 years places the fleet approximately in the middle of its economic life. While a relatively young average age is generally viewed favorably by investors (reducing near-term obsolescence and regulatory compliance risk), it also implies substantial future capital expenditure requirements for ongoing drydocking, maintenance, and eventual fleet renewal.
Drydocking is required at approximately five-year intervals for each vessel under classification society rules, and each drydocking cycle involves significant cost (typically $1.5–3.0 million per vessel, depending on the vessel's size, age, and condition) and revenue loss (approximately 15–25 off-hire days per drydocking). With a fleet of 50 vessels, TSL can expect to drydock approximately 10 vessels per year on average, representing annual drydocking expenditures in the range of $15–30 million plus the associated revenue impact of off-hire days.
The OM fourth draft notes that $72 million of the net proceeds of the offering are allocated to general corporate purposes and fleet capital expenditures. The risk factor should ensure that investors understand that this allocation is expected to be consumed by ongoing maintenance and drydocking requirements over the near term and may not be sufficient to fund material fleet expansion or renewal without additional capital.
Cross-reference: OM Business Description, "Fleet Profile" (pages 113–118); OM "Use of Proceeds" (pages 20–21).
V.D. Flag State and Classification Society Risks
TSL's fleet is registered across multiple flag states, including Malta, the marshall Islands, Singapore, and others. Each flag state imposes its own regulatory requirements relating to vessel registration, safety standards, environmental compliance, and crewing. The risk factor addresses the risk that a vessel could lose its registration or fail to comply with flag-state requirements, which could affect its operability and, in the case of Collateral Vessels, its mortgageability.
Classification societies (such as Meridian Industries, Bureau Veritas, and the American Bureau of Shipping) establish and enforce technical standards for vessel construction, maintenance, and operation. Loss of classification could render a vessel uninsurable and inoperable, and could constitute an event of default under the Security Documents (which require Collateral Vessels to maintain classification with an approved classification society at all times).
A related risk is that the enforceability of ship mortgages depends on the law of the flag state in which the vessel is registered, as well as on the Singapore law governing the Security Documents. Different flag states have different rules governing the priority of ship mortgage liens relative to other maritime liens (such as crew wages, salvage, and port charges). In some jurisdictions, maritime liens for crew wages and salvage have priority over ship mortgage liens, which could reduce the recovery available to noteholders in an enforcement scenario.
Cross-reference: OM "Description of the Notes — Security — Ship Mortgages" (pages 193–198).
VI. Category 4: Risks Related to the Notes and the Offering Structure
Category 4 addresses risks inherent in the terms, structure, and legal framework of the Notes. This is the largest category in the OM, containing eleven individual risk factors. The eight most significant are discussed below with drafting commentary. The remaining three risk factors (relating to currency exchange risk on Notes denominated in USD, FATCA withholding, and the substitution of co-issuer provisions) are adequately drafted and do not require material revision.
VI.A. High-Yield Notes — General Risks
The Notes are high-yield, speculative-grade debt instruments. They have received preliminary ratings of B+ (stable outlook) from Polaris Ratings Group Ltd. (assigned August 8, 2022) and B1 (stable outlook) from Oceanic Credit Assessments Inc. (assigned August 10, 2022). These ratings reflect the rating agencies' assessment of the Issuers' ability to meet their payment obligations under the Notes, taking into account the credit profile of TSL and the terms of the Notes (including the security package).
The risk factor as drafted includes standard disclosure that ratings are not a recommendation to purchase, hold, or sell the Notes, that ratings may be downgraded, suspended, or withdrawn at any time, and that a downgrade or withdrawal of ratings could adversely affect the market price and liquidity of the Notes. The disclosure also notes that different rating agencies may assign different ratings to the Notes and that ratings assigned to the Notes may not reflect the potential impact of all risks relating to the Notes, the collateral, or the Issuers' business.
We have reviewed this risk factor against comparable precedents and believe it is adequately drafted. No material changes are recommended.
Cross-reference: OM "Ratings" (page 19).
VI.B. Refinancing and Liquidity Risk
The Notes mature on October 15, 2029, representing a seven-year tenor from the anticipated closing date. At maturity, the Issuers will be required to repay the entire $400 million principal amount of the Notes (together with any accrued and unpaid interest). There can be no assurance that the Issuers will have sufficient cash on hand or will be able to refinance the Notes at or prior to maturity on commercially acceptable terms, or at all.
The pro forma capital structure of TSL following the offering and the application of proceeds is as follows:
• Total pro forma debt: $400 million (Notes only, following the full refinancing of the existing $310 million of bilateral secured credit facilities with Meridian Maritime Bank AG ($190 million) and Clearwater Shipping Finance Ltd. ($120 million))
• Pro forma cash and cash equivalents: $58.3 million (estimated)
• Pro forma net debt: $341.7 million ($400M − $58.3M)
• Pro forma net leverage: 1.59x ($341.7M net debt ÷ $214.6M LTM Adjusted EBITDA)
• Pro forma annual interest expense: $35.0 million (8.750% coupon × $400M principal)
• Pro forma interest coverage: 6.13x ($214.6M LTM Adjusted EBITDA ÷ $35.0M annual interest expense)
While the pro forma credit metrics at closing are moderate by high-yield standards (1.59x net leverage and 6.13x interest coverage), they are heavily dependent on the elevated EBITDA levels achieved during the current market cycle. If EBITDA were to decline from current levels, leverage would increase and interest coverage would decline, potentially materially.
Drafting Commentary. We recommend emphasizing the sensitivity of credit metrics to EBITDA cyclicality. Specifically, ABS has shared with us its revised FY2023E Adjusted EBITDA estimate of approximately $128 million (down from the LTM figure of $214.6 million used in the pro forma calculations). If EBITDA were to decline to $128 million:
• Pro forma net leverage would increase from 1.59x to approximately 2.67x ($341.7M ÷ $128M) — still within the 3.50x incurrence covenant threshold but representing a significant deterioration from closing levels.
• Interest coverage would decline from 6.13x to approximately 3.66x ($128M ÷ $35M) — still providing reasonable debt service coverage but materially below the 6.13x level at closing.
This stress scenario is not hypothetical — it reflects the initial purchaser's own base-case estimate for FY2023 in light of declining freight rates. We believe it would be appropriate to include disclosure that acknowledges the sensitivity of leverage and coverage metrics to EBITDA performance, even if specific forward-looking projections are not included. This recommendation is discussed further in Section XI.A.
VI.C. Incurrence-Based Covenant Limitations
The Indenture contains a set of covenants that restrict the activities of the Issuers and their restricted subsidiaries. However, with the important exception of the collateral coverage ratio maintenance covenant (2.00x, tested semi-annually), the covenants in the Indenture are predominantly incurrence-based rather than maintenance-based.
This distinction is critical for investors to understand. Under an incurrence-based covenant framework, the relevant financial test (e.g., the Maximum Total Net Leverage Ratio of 3.50x) applies only at the time the Issuers seek to take a specified action (e.g., incur additional indebtedness). If the Issuers' financial condition subsequently deteriorates and their actual leverage exceeds 3.50x due to a decline in earnings (rather than an incurrence of additional debt), no default or event of default is triggered. The leverage ratio simply prevents the Issuers from incurring additional debt until their leverage returns below the threshold.
Similarly, the Restricted Payments covenant permits the Issuers to make restricted payments (including dividends and distributions to shareholders) up to the greater of $30 million and 10% of Consolidated Net Tangible Assets, subject to compliance with the incurrence-based leverage test. This basket provides the Issuers with significant flexibility to make distributions to the controlling shareholder even during periods of financial stress, provided that the relevant conditions were satisfied at the time of incurrence or commitment.
Investors therefore have limited covenant protection against business deterioration short of an actual payment default (failure to pay interest or principal when due) or a breach of the collateral coverage maintenance covenant (2.00x). In contrast, maintenance-based covenants — which are tested on a periodic basis regardless of whether the Issuers have taken any specific action — are more commonly found in bank credit facilities and provide lenders with earlier warning of, and remedies for, financial deterioration.
Drafting Commentary. This is standard disclosure for a high-yield offering, but it is important that it be presented clearly and prominently. We recommend including a brief contrast with maintenance-based covenants typical of bank loan facilities to help investors understand the practical significance of the incurrence-based framework. We should also ensure that the Restricted Payments basket is clearly described, including the conditions under which distributions may be made and the available capacity under the basket at closing.
Cross-reference: OM "Description of the Notes — Certain Covenants — Limitation on Indebtedness" (pages 228–234); OM "Description of the Notes — Certain Covenants — Limitation on Restricted Payments" (pages 234–240).
VI.D. Optional Redemption and Make-Whole Risk
The Notes are subject to optional redemption by the Issuers under the following call structure:
In addition, within 180 days of an initial public offering ("IPO") of TSL's equity securities, the Issuers may redeem up to 40% of the aggregate principal amount of the Notes at a redemption price of 108.750% of par (the "Equity Clawback").
The risk factor addresses the risk that the Notes may be redeemed at a time that is unfavorable to investors — for example, during a period of declining interest rates when investors would prefer to retain their investment in the higher-yielding Notes. In a make-whole scenario, the Treasury plus 50 basis points spread may not fully compensate investors for the lost yield, depending on market conditions at the time of redemption.
Cross-reference: OM "Description of the Notes — Optional Redemption" (pages 218–222).
VI.E. Change of Control
Upon the occurrence of a Change of Control (as defined in the Indenture), each holder of Notes has the right to require the Issuers to repurchase all or any portion of such holder's Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest.
A "Change of Control" is defined in the Indenture to include, among other things, any person or group (other than Dimitrios Kallistratos and his related persons, including KMH and members of the Kallistratos family) acquiring, directly or indirectly, more than 50% of the total voting power of the equity interests of TSL.
The risk factor addresses the risk that TSL may lack sufficient liquidity to fund a Change of Control offer if triggered. A Change of Control offer for 100% of the outstanding Notes would require the Issuers to fund approximately $404 million (101% × $400 million plus accrued interest), which could exceed TSL's available liquidity and borrowing capacity. In the event that the Issuers are unable to fund a Change of Control offer, a failure to consummate the offer would constitute an event of default under the Indenture.
Cross-reference: OM "Description of the Notes — Repurchase at the Option of Holders — Change of Control" (pages 222–225).
VI.F. Co-Issuer / SPV Structure
Thalassa Finance Pte. Ltd. ("TFPL"), UEN 202209345K, is a wholly-owned subsidiary of TSL incorporated in Singapore as a private company limited by shares. TFPL was established for the purpose of serving as co-issuer of the Notes and as the entity through which intercompany loan receivables are held and administered.
TFPL's sole director is Marina Demetriou, who also serves as CFO of TSL. TFPL has no employees, no independent operations, and no revenue-generating activities other than the receipt of intercompany loan interest from fleet-owning subsidiaries. TFPL holds aggregate intercompany loan receivables of $365 million, representing advances made to fleet-owning subsidiaries for the purpose of financing vessel acquisitions and operations. These intercompany loans are the principal assets of TFPL.
The ability of TFPL to meet its obligations as co-issuer under the Notes depends entirely on the receipt of intercompany cash flows from TSL's fleet-owning subsidiaries. If those subsidiaries were to default on their intercompany loan obligations to TFPL (whether due to financial distress, regulatory restrictions on dividend or interest payments, or otherwise), TFPL would lack the resources to service the Notes.
Drafting Commentary. We recommend ensuring that the OM disclosure adequately describes the SPV's dependence on intercompany cash flows and the flow-of-funds mechanics. The current fourth draft describes TFPL's role as co-issuer but could benefit from additional detail on: (i) the terms of the intercompany loans (maturity, interest rate, subordination); (ii) the assignment of the intercompany loan receivables to the Security Agent as part of the collateral package; and (iii) the risk that the intercompany loan interest rate may be subject to transfer pricing challenges by the Inland Revenue Authority of Singapore, which could affect the economics of the intercompany flow. This last point connects to the transfer pricing risk discussed in Section IX.C below.
Cross-reference: OM "Description of the Notes — The Issuers — Thalassa Finance Pte. Ltd." (pages 82–84).
VI.G. Transfer Restrictions and Liquidity of the Notes
The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes are being offered and sold only to qualified institutional buyers ("QIBs") in reliance on Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act.
The Notes will be issued in minimum denominations of $200,000 and integral multiples of $1,000 in excess thereof. The proposed ISINs are XS2498731056 (Regulation S Global Note) and US87265TAA10 (Rule 144A Global Note). The proposed CUSIP for the Rule 144A Global Note is 87265T AA1.
An application is expected to be made to list the Notes on the SGX-ST. However, there can be no assurance that the listing application will be approved or, if approved, that an active trading market for the Notes will develop or be sustained. High-yield notes sold in Rule 144A / Regulation S offerings typically have limited secondary market liquidity, particularly during periods of market stress, and holders may be unable to sell their Notes at their desired price or at all.
Cross-reference: OM "Transfer Restrictions" (pages 275–282) and "Plan of Distribution" (pages 283–290).
VI.H. Asset Sale Covenant
The Indenture requires that if the Issuers or any restricted subsidiary consummates an asset sale generating net proceeds in excess of $15 million per transaction (or series of related transactions), 100% of such net proceeds must be applied, within 365 days following the receipt thereof, to either (i) make an offer to repurchase Notes at par or (ii) reinvest such proceeds in assets useful in the Issuers' business (the "reinvestment exception"). If net proceeds are not so applied within the 365-day period, the Issuers are required to make an offer to repurchase Notes at par with the excess net proceeds.
The risk factor addresses the risk that asset sales may not generate sufficient proceeds to meaningfully reduce the outstanding principal of the Notes, and that the reinvestment exception may be used broadly to avoid mandatory repurchase offers. The reinvestment exception is defined to permit reinvestment in any assets (including vessels) useful in the Issuers' business, which provides the Issuers with significant discretion to reinvest asset sale proceeds without repurchasing Notes.
Cross-reference: OM "Description of the Notes — Certain Covenants — Asset Sales" (pages 240–244).
VII. Category 5: Risks Related to the Security Package and Collateral
Category 5 addresses risks associated with the security package securing the Notes. This category contains six individual risk factors in the OM fourth draft. The four most significant are discussed below with drafting commentary. The remaining two (relating to the risk of vessel arrest by third parties and the risk of impairment of collateral value due to environmental contamination) are adequately drafted and do not require material revision.
VII.A. Collateral Coverage and Enforcement Limitations
The security package for the Notes consists of the following:
• First-priority ship mortgages over 28 Collateral Vessels (appraised at $1.175 billion as of June 2022 by Compass Marine Valuations Ltd.)
• Assignment of earnings generated by the 28 Collateral Vessels (including hire, freight, demurrage, and other payments receivable by the Issuers or the fleet-owning guarantor subsidiaries in respect of the Collateral Vessels)
• Assignment of insurances covering the 28 Collateral Vessels (including hull and machinery, P&I, war risk, and loss of hire insurance)
• Assignment of requisition compensation payable in respect of the 28 Collateral Vessels
• Pledge of 100% of the equity in TFPL and in each of the four fleet-owning guarantor subsidiaries
• Assignment of $365 million of intercompany loan receivables held by TFPL against the fleet-owning subsidiaries
Atlas Collateral Agency Pte. Ltd. (UEN 200115678R) serves as Security Agent under the Security Documents and holds the security for the benefit of the noteholders.
The risk factor as drafted addresses several practical limitations on enforcement of the security package. Ship arrest and judicial sale processes vary significantly by jurisdiction and flag state. The enforcement of ship mortgages requires the arrest of vessels in a jurisdiction that recognizes the mortgage and provides a judicial sale mechanism. The time required to arrest a vessel, obtain a judicial sale order, and distribute the proceeds can range from several months to over a year, depending on the jurisdiction, and can involve substantial legal costs. During the enforcement period, the vessel may continue to depreciate in value, may be subject to operating costs and maintenance requirements, and may be subject to competing claims.
Competing claims that may have priority over ship mortgage liens in certain jurisdictions include maritime liens for crew wages, salvage, collision damage, port charges, and pilotage fees. Under the International Convention on Maritime Liens and Mortgages (1993) and the domestic law of many flag states, maritime liens for crew wages and salvage are accorded priority over registered ship mortgage liens. This means that in an enforcement scenario, the proceeds of a judicial sale of a Collateral Vessel may first be applied to satisfy maritime liens before any distribution is made to noteholders.
Drafting Commentary. We recommend including disclosure on (i) the potential for significant delays in enforcement, including jurisdictional disputes over the appropriate forum for arrest and sale, (ii) the possibility that competing claims (including maritime liens for crew wages, port charges, and salvage) may reduce recoveries available to noteholders, and (iii) the risk that the aggregate value of the Collateral Vessels at the time of enforcement may be significantly less than their current appraised value of $1.175 billion, due to vessel value cyclicality, depreciation, and the impact of distressed sale conditions. The current fourth draft addresses these risks but could benefit from more specific disclosure regarding the variability of enforcement outcomes across jurisdictions.
Cross-reference: OM "Description of the Notes — Security" (pages 190–210).
VII.B. Intercreditor Agreement and Priority
The Intercreditor Agreement governs the priority and enforcement mechanics among the Security Agent, th

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