UPDATE 2-China's HNA Group says efforts to resolve liquidity crisis progressing

(Adds a report from Caixin)

BEIJING, Jan 22 (Reuters) - China’s HNA Group said on Friday a local government-led working team has finished due diligence at the company and laid out risk disposal plans, enabling it to move to the next stage of resolving a multi-year liquidity crisis.

Risk disposal efforts are progressing smoothly and will soon enter a critical period, the company said in a statement on its social media account.

It also said that it had managed to safeguard the continued operation of its core aviation business through these efforts.

HNA Group was once one of China’s most aggressive deal-makers, spending $50 billion in a global acquisition spree that saw it take stakes in big names such as Deutsche Bank AG and Hilton Worldwide Holdings Inc.

But its massive spending drew scrutiny from China’s central government and other overseas regulators, prompting the company to sell many of its purchases and focus on its airline and tourism business three years ago.

In February last year, after the COVID-19 pandemic paralysed travel demand and hit cash flows, HNA, which owns Hainan Airlines, asked for local government to lead a work group dedicated to resolving its liquidity risks. Gu Gang, chairman of the investment arm of Hainan province, became the executive chairman.

In Friday’s announcement, HNA said Gu Gang has resigned as the executive chairman, but he remains as the head of the government-led work group.

HNA said it would make an all-out effort to implement the risk disposal plans under the guidance of the government-led work group and properly resolve the risks.

The plans are “extremely complicated”, financial news outlet Caixin reported, citing an unnamed source close to the work group, and it was only after rounds of negotiations that regulators and most of the creditors offered their support.

HNA Group owns more than 2,300 companies, Caixin said, citing findings from the work group.

The company also directly owns or holds stakes in a number of local Chinese airlines. It had previously signed agreements to sell its shares of small airlines to the local governments, but efforts have stalled amid the government intervention, Caixin reported, citing industry insiders.

HNA did not immediately respond to a request for further comment. (Reporting by Stella Qiu and Brenda Goh; editing by Jason Neely, Emelia Sithole-Matarise, Kirsten Donovan)