UPDATE 1-Daewoo Elec creditors reject Electrolux discount demand -sources

* Electrolux's demand seen as unacceptable -sources

* Sale process dealt a blow as legal obstacle weighs (Adds details)

SEOUL, June 29 (Reuters) - Creditors of South Korea's Daewoo Electronics have rejected a demand by Sweden's Electrolux (ELUXb.ST) to cut the sale price by above 5 percent and will consider restarting the sale process, creditor sources said, a move that puts the deal in jeopardy again.

"Lead creditor (Woori Bank) said in a letter to Electrolux that it cannot accept the demand...and the only alternative is to start off with a clean slate," a source told Reuters.

The sources requested anonymity due to the sensitivity of the situation.

Years of attempts to sell the unlisted Korean home appliance maker, including the latest $513 million deal with Iran's Entekhab Industrial Group, have failed.

Recent legal action by Entekhab is a burden for creditors seeking to move sale talks with Electrolux ahead, the source added.

A holding company belonging to Entekhab filed for a court injunction to prevent creditors from cancelling its takeover deal.

Reserve bidder Electrolux, believed to have offered around 600 billion won ($555.2 million) in a race with Entekhab, told the creditors that it was willing to start sale negotiations, the sources said.

But it attached several conditions to the offer, including a price cut and the separation of properties belonging to Daewoo from the deal.

The loss-making firm has drawn little interest among Korean companies, with its product line-up of refrigerators, washers and televisions not seen as competitive against low-priced Chinese producers and bigger local rivals such as Samsung Electronics and LG Electronics .

Since 2006 a series of talks to sell Daewoo fell through with Ripplewood Holdings, a private equity unit of Morgan Stanley , and a consortium of India's Videocon Industries and RJH International .

Daewoo was placed under a debt restructuring programme after its parent group went bankrupt in 1999.

Unlisted Daewoo posted a consolidated net loss of 183.9 billion won last year, compared to a net loss of 109 billion won in 2009, according to a recent regulatory filing. ($1 = 1080.750 Korean Won) (Reporting by Ju-min Park; Editing by Jonathan Hopfner)