Case Study Of Loncin Bond Default In The Perspective Of Liquidity Risk

Debt financing is one of the important channels of external financing of enterprises.However,with the accumulation of credit risk,the default of corporate bonds in our country has occurred from time to time in recent years,preventing and resolving the default risk of corporate bonds has become an important issue facing our enterprises and financial circles.As a well-known motorcycle and engine company in China,Loncin Holdings Co.,Ltd.has a prominent position in the industry and is deeply trusted by investors.In addition,many similar problems existing in Chinese private enterprises are clearly reflected in the management and operation of Loncin Holdings Co.,Ltd..Therefore,this article selects the Loncin bond default event as a case,and deeply analyzes the causes of the bond default event from the perspective of corporate liquidity risk,so as to provide inspiration and reference for relevant companies to effectively prevent bond default risks.Based on the theory and literature related to bond default and corporate liquidity risk,this article first briefly introduces the basic situation of Loncin Holdings Co.,Ltd.,then reviews and explains the beginning and end of "16 Loncin MTN001" bond default,the company’s response and the impact of the event,and then analyzes the causes of the bond default from three aspects: related financial indicators,endogenous liquidity risk and exogenous liquidity risk.The author found that Loncin Holdings Co.,Ltd.has expanded aggressively since 2014 and accumulated a large amount of debt.Recently,with the gradual maturity of long-term debt,the pressure of immediate repayment of the company has increased.From the perspective of the source of debt repayment funds,on the one hand,the company has suffered operating losses in recent years,its own profitability is poor,and it is facing significant impairment of goodwill,and its own funds that can be relied on are seriously insufficient;on the other hand,due to the serious equity pledge of the company and a large number of them are in the state of freezing and waiting for freezing,the company’s external financing capacity is weak.At the same time,the company also has problems with related parties occupying funds,which aggravates the liquidity tension and weakens its solvency.Under the combined effect of the above factors,Loncin Holdings Co.,Ltd.was unable to repay the principal and interest of the bonds on time,which eventually led to the occurrence of a default event.Based on the above analysis and conclusions,the author believes that in daily management and operation,enterprises should actively expand financing channels,optimize asset and liability structure,strengthen accounts receivable management,improve internal control mechanisms,and try an asset-light operating model to reduce their own liquidity risk,thereby avoiding the occurrence of bond default events.The innovation of this paper is embodied in the following three points.Firstly,the research in this paper deepens the research on the mechanism of corporate bond default.In the past,the academic community usually carried out "broad and comprehensive" research on default cases,but this article focuses on analyzing the causes of Loncin’s bond default from the perspective of corporate liquidity risk.It is beneficial to obtain more detailed and in-depth analysis results and draw more operational implications.Secondly,the research in this paper enriches the existing research on corporate liquidity risk.In the past,the research on liquidity risk in the academic circle usually focused on financial institutions such as commercial banks and financial leasing companies,and the research on the field of private enterprises was relatively lacking.This paper chooses to explore the causes of bond default from the perspective of liquidity risk based on private enterprises,in order to form a useful supplement to existing research.Thirdly,the analysis conclusions of this paper have played a certain reference and warning role in preventing corporate liquidity risks and reducing the possibility of corporate bond defaults.