There are concerns that so-called debt covenants which may be breached. Some of Sasol's loan conditions require that its debt-to-profit levels remain above a certain level. Sasol's profits will take hit a from the lower oil price, which will probably leave it in breach of these debt covenants. This means that its loans could become payable immediately.
But the oil crash on Monday proved the final straw for investors. Oil plunged over 30% after Saudi Arabia announced steep cuts to its oil prices after Russia refused to lower its oil production, along with other OPEC countries. On Tuesday, Brent crude oil showed signs of life, rising by 12% to $37 a barrel. But Sasol continued to bleed.
Late on Monday, its management postponed a call with analysts, scheduled for Tuesday, to discuss Moody’s decision to downgrade the company's bonds to"junk". Executives said they needed more time to assess the impact of the oil price fall. The company also confirmed that it did not hedge oil prices - which means Sasol will feel the full impact of the price crash.
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