Despite fears Kaisa's dollar bond default may herald of a wave of more to come from China, the property developer's troubles may be more of a one-off soap opera.
"This case has gone a little offbeat," said Steve Wang, chief China economist at Reorient Financial, calling it both "unique" and "unpredictable."
The developer defaulted on its offshore dollar-denominated bonds on Monday when the 30-day grace period expired without the company making coupon payments of around $52 million on two senior notes. It's the latest in the company's murky troubles, which may have begun last year when local authorities blocked it from selling some of its projects. The restrictions may have been related to a corruption investigation into Shenzhen's former security chief Jiang Zunyu, according to a Bloomberg News report.
Earlier this year, larger rival Sunac China proposed buying 49.3 percent of Kaisa for around $587 million from the controlling Kwok brothers, but local Chinese media are reporting that senior Sunac managers were locked out of Kaisa offices this month. It's a development that might signal the company preferred a default to a rescue.
"Sunac has indicated it's not willing to wait indefinitely," said Christopher Yip, director for corporate ratings at Standard & Poor's, which downgraded Kaisa's rating to "D," indicating payment default, last month. The deal has been riding on whether Kaisa can resolve its situation with creditors, he noted.
"If Sunac walks away, that's going to be quite a negative for the long-term prospects for Kaisa itself," Yip said.
Under the spotlight
Kaisa's saga has been under the spotlight as many analysts consider China's property sector -- closely watched because it contributes an estimated 15 percent of the mainland's gross domestic product (GDP) -- overheated and ripe with default risks. While China's corporate defaults have been rare, Beijing is widely believed to be moving away from bailouts and toward allowing troubled companies to succumb to market forces.