By Kyunghee Park and Seonjin Cha - 2012-08-16T08:17:04Z

Korea Aerospace Industries Ltd. (047810) shareholders only drew interest from Korean Air Lines Co. as they seek to sell a 1.1 trillion won ($970 million) stake, threatening to derail the process.

The shareholders extended a registration deadline until Aug. 31 from today as they seek another potential bidder, said an official at state-run Korea Finance Corp., who declined to be identified citing company policy. They will decide whether to proceed after that, he said. At least two bids are needed because of rules governing sales by government entities.

Concerns about the impact of a looming presidential election may have deterred bidders even as North Koreas militarization and rising defense spending in emerging markets spur demand for Korea Aerospaces helicopters and T-50 trainers jets, said Justin Lee, a Seoul-based analyst at Nomura Holdings Inc. The government last month didnt get any bids for a stake in Woori Finance Holdings Co. (053000), the countrys biggest financial services group by assets.

Extending the deadline wont change the picture, Lee said. The political situation will continue to be a burden for the deal.

About 1,600 workers also protested against the sale outside Korea Finances offices today in Seoul, according to the planemakers biggest union.

Korean Air said it had registered its interest as it tries to expand its aerospace business. The company, which already makes parts for Airbus SAS and Boeing Co., didnt say how much it would offer for the Korea Aerospace stake. The sale is being managed by Korea Development Bank and Credit Suisse AG.

Bidders still have until Aug. 31 to make formal offers, Korea Finance said. The company is offering part of its 26 percent stake in Sacheon-based Korea Aerospace in the sale. It plans to remain the second-biggest shareholder. Hyundai Motor Co. (005380), Samsung Techwin Co. and Doosan Group are each looking to offload 10 percent holdings. The planemaker has a market value of $2.37 billion, according to data compiled by Bloomberg.

The planemaker advanced 1.1 percent to close at 27,550 won in Seoul. Korean Air fell 0.6 percent to 50,300 won.

Lawmakers have objected to the sale because of concerns about transparency. Korea Finance is acting hastily and placing the planemaker under private control may weaken public accountability, Chyung Ho Joon of the Democratic United Party said during a July 30 meeting of the National Policy Committee, a parliamentary body that oversees Korea Finance and other agencies.

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Korea Aerospace Stake Sale May Fail as Election Deters Bidders