Korea Aerospace's $1B Sale

Korean Air Lines Co. says it is considering bidding for the country's sole aircraft maker after KAI shareholders including Korea Finance Corp offered to sell a combined stake of around 42%.

The stake on offer includes the respective 10% shares held by Hyundai Motor, Samsung Techwin and Doosan Group. Korea Finance Corp will cut its holdings in the aircraft maker by 11.41%, while Korea Development Bank will sell its entire 0.34% stake.

The deal, if it happens, would be one of the few South Korean stake sales expected to fetch more than 1 trillion won this year.

Analysts are already casting doubt on Korean Air's ability to pay for the stake, with the country's largest airline saddled with a debt-to-equity ratio of more than 700% as of end-March.

The airline then posted a April-to-June net loss after its cargo business performed poorly, forcing Korean Air to consider diversifying into other segments such as aircraft manufacturing.

Korea Finance Corp said KAI shareholders would accept letters of intent by August 16 and planned to accept final bids around October, with an eye to completing the sale by the end of the year.

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