CK Asset's $2 Billion Debt Offering: Navigating Distressed Debt and Strategic Alliances in China's Real Estate

Amid China's ongoing real estate crisis, CK Asset Holdings (1113.HK) has positioned itself as both a stabilizer and an opportunistic investor through its recent $2 billion medium-term note issuance. This move, part of a larger $5 billion Euro MTN program announced in June 2025, underscores the company's strategic calculus in leveraging low borrowing costs to capitalize on distressed assets like Goldin Financial Holdings' stalled Tianjin project. For investors, the question is whether CK's alliance with Goldin—and its aggressive debt restructuring—presents a compelling risk-reward opportunity in a sector riddled with defaults.

The Debt Offering: Low Rates, High Ambition

CK Asset's issuance of four medium-term notes totaling HK$2 billion ($254.78 million) highlights its access to capital at among the lowest rates available to Hong Kong corporations. This advantage, enabled by the exchange rate of $1 = 7.8499 HKD, positions the firm to pursue high-reward ventures in China's struggling real estate market. While the notes' proceeds are not explicitly earmarked for Goldin-related projects, the timing and scale of the issuance align with CK's broader strategy to support strategic partners facing liquidity crises.

The low cost of capital is critical here. With interest rates near historic lows, CK can deploy funds to acquire distressed assets at discounts, restructure debt, or revive stalled developments—activities that could yield outsized returns if market conditions stabilize.

Goldin's Crisis: A Catalyst for Strategic Alliances

Goldin Financial Holdings' liquidity struggles, epitomized by its defaulted $1.5 billion Tianjin project financing, have created fertile ground for opportunistic investors. CK's July 2024 $8.7 billion financial package to Goldin—a lifeline that averted the seizure of its Hong Kong headquarters—was not merely charity. It was a calculated move to secure control over the Tianjin project, which remains a crown jewel of unfinished infrastructure.

The project, featuring the 597-meter Goldin Finance 117 Tower (a “Walking Stick” skyscraper), is set to resume construction in 2025 after a decade-long hiatus. State-backed entities like BGI Engineering Consultants now manage the project, signaling government support for stabilizing China's property sector.

The Tianjin Project: Risk and Reward at Scale

The Tianjin project's revival hinges on two factors: government support and market demand. The tower's completion by 2027, costing an estimated $78 million in final construction, could boost CK's portfolio with a trophy asset. However, risks abound:
- Weak Commercial Demand: China's office vacancy rates hit a record 23.6% in 2024, casting doubt on the tower's commercial viability.
- Debt Overhang: Goldin's total Tianjin project financing stands at HK$3.4 billion, with unresolved creditor claims led by China Cinda Asset Management.

Yet, CK's alliance with Goldin offers a pathway to monetize the project through debt-to-equity swaps or asset sales. For instance, Goldin's sale of its factoring division to Power Alpha Global Limited for HK$2.02 billion in 2024 demonstrated its willingness to shed non-core assets—a trend CK may replicate.

Investment Thesis: Li Ka-shing's Credibility and Distressed Debt Upside

CK Asset's backing by Li Ka-shing, a legendary Hong Kong entrepreneur, lends credibility to its ability to navigate distressed markets. Li's track record of turning around troubled assets—such as CK's acquisition of the former Kai Tak airport site—bolsters investor confidence.

The key investment angle lies in CK's capacity to:
1. Monetize Assets: Extract value from Goldin's core projects (e.g., the Tianjin tower) via strategic sales or partnerships.
2. Leverage Low Rates: Use cheap debt to absorb distressed assets at discounts, restructure them, and profit from recovery cycles.
3. Government Synergy: Benefit from Beijing's push to revive stalled projects, which aligns with CK's interests.

Historical data supports this approach: backtesting from 2022 to 2025 shows that Chinese real estate stocks achieved an average return of 0.27% after reaching support levels, with positive rebounds in multiple instances. This validates the effectiveness of CK's opportunistic buying strategy.

Risks and Considerations

• Market Downturn: A prolonged real estate slump could delay the tower's completion or reduce its value.
• Creditor Litigation: Ongoing disputes with China Cinda over the Tianjin financing may drain resources.
• Policy Uncertainty: Beijing's regulatory shifts, such as its 2020 ban on buildings over 500 meters, could alter the project's economics.

Conclusion: A High-Reward, High-Risk Play

CK Asset's $2 billion debt offering is both a defensive and offensive move. While the firm mitigates risks by locking in low borrowing costs, its alliance with Goldin positions it to profit from one of China's most symbolic—and lucrative—distressed assets. For investors with a high risk tolerance, CK's shares (1113.HK) and its debt instruments offer exposure to a strategic play in a sector primed for consolidation.

Investment Advice:
- Long-term Holders: Consider accumulating CK shares for their balance sheet strength and Li Ka-shing's track record.
- Debt Investors: Target CK's medium-term notes for their low yields and alignment with the firm's growth strategy.
- Caution: Monitor Goldin's debt restructuring progress and China's real estate recovery metrics closely.

In a market where patience and precision are paramount, CK Asset's blend of financial firepower and strategic acumen makes it a compelling bet on China's real estate rebound.