20.

Commitments and Contingencies

As at December 31, 2018, major commitments with local financial institutions are as follows:

(In millions of Korean won and

thousands of foreign currencies)

Financial institution

Currency

Limit

Used amount

Bank overdraft

Kookmin Bank and others

KRW

1,697,000

—

Commercial papers

NH Investment & Securities
Co., Ltd.

KRW

300,000

Inter-Korean Cooperation Fund

Export-Import Bank of Korea

KRW

37,700

3,948

Collateralized loan on electronic accounts receivable-trade

Shinhan Bank and others

KRW

495,560

70,759

Plus electronic notes payable

Industrial Bank of Korea

KRW

50,000

960

Loans for working capital

Korea Development Bank
and others

KRW

254,300

158,000

Facility loans

Shinhan Bank and others

KRW

10,123

8,406

Kookmin Bank and others

USD

212,000

127,024

Facility loans on ships

Shinhan Bank

USD

9,000

Export L/C

Shinhan Bank

USD

—

1,156

Derivatives transaction limit

Korea Development Bank

KRW

100,000

64,622

FX forward trading commitment

Shinhan Bank

USD

11,500

—

Total

KRW

2,944,683

606,695

USD

232,500

137,180

As at December 31, 2018, guarantees received from financial institutions are as follows:


(In millions of Korean won and thousands of foreign currencies)	Financial institution	Currency			Limit
Performance guarantee	Seoul Guarantee Insurance and others		KRW			299,689
			USD			1,200
Guarantee for import letters of credit	Industrial Bank of Korea and others		USD			5,980
Guarantee for payment in Korean currency	Shinhan Bank and others		KRW			5
Guarantee for payment in foreign currency	KEB Hana and others		USD			51,766
			PLN	¹		23,000
Comprehensive credit line	KEB Hana Bank and others		KRW			40,000
Comprehensive credit line	KEB Hana Bank		USD			10,000
Bid guarantee	KEB Hana Bank		USD			400
Bid guarantee			KRW			58,992
Performance guarantee /Warranty Guarantee	Korea Software Financial Cooperative and others		KRW			376,420
Guarantee for advances received/others			KRW			124,901
Bid guarantee			KRW			350
Warranty guarantee			KRW			1,037
Guarantees for licensing			KRW			4,070
Performance guarantee/Warranty Guarantee	Seoul Guarantee Insurance		KRW			996
Guarantee for public sale			KRW			120
Guarantee for deposits			KRW			3,525

Total			KRW			910,105
			USD			69,346
			PLN	¹		23,000

1	Polish Zloty.

As at December 31, 2018, guarantees provided by the Group to a third party, are as follows:

(In millions of Korean won
and thousands of foreign
currencies)

Subject to payment
guarantees

Creditor

Currency

Limit

Used
amount

Period

KT Estate Inc.

Busan Gaya Centreville Buyers

Shinhan Bank

KRW

4,854

2,503

Nov 10, 2017

~Oct. 31, 2020

KT Estate Inc.

Daegu Beomeo-Crossroads SeohanIDaum Buyers

Shinhan Bank

KRW

8,172

4,271

Oct 29, 2017

~Nov. 30, 2020

KT Hitel Co., Ltd.

Shinhan Bank

Cash payers

KRW

538

—

Apr 19, 2018

~Apr 19, 2019

KT Hitel Co., Ltd.

Korea Software Financial Cooperative

Yonsei
University and
others

KRW

34,715

1,616

Oct 22, 2018

~Oct 22, 2021

BC Card Co., Ltd

PT BCcard Asia Pacific

Shinhan Bank,
Indonesia

IDR

8,000,000

Sep 18, 2018

~Sep 17, 2019

The Controlling Company is jointly and severally obligated with KT Sat Co., Ltd. to pay KT Sat Co., Ltd.’s liabilities incurred prior to spin-off. As at December 31, 2018, the Controlling Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement of ￦3,480 million.

For the year ended December 31, 2018, the Group made agreements with the Securitization Specialty Companies (2018: Giga LTE Thirty seventh to Forty second Securitization Specialty Co., Ltd., 2017: Giga LTE Thirty first to Thirty sixth Securitization Specialty Co., Ltd.), and disposed of its trade receivables related to handset sales. The Group also made asset management agreements with each securitization specialty company and in accordance with the agreement the Group will receive asset management fees upon liquidation of securitization specialty company.

As at December 31, 2018, the Group is a defendant in 172 lawsuits with the total claimed amount of ￦169,246 million (2017: ￦112,639 million). As at December 31, 2018, litigation provisions of ￦58,776 million for pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The final outcomes of the cases cannot be estimated at the end of the reporting period.

In December 2013, Asia Broadcast Satellite Holdings Ltd. (“ABS”) filed a request for meditation to the International Chamber of Commerce (“ICC”) for the compensation of damages from the ownership of the satellite Koreasat-3 (“K3”) and the alleged breach of the entrustment control contract related to K3, which was made and entered into with the Controlling Company and its subsidiary, KT Sat Co., Ltd. In July 2017, the ICC issued a partial ruling that ABS has the ownership of K3, and in March 2018, the final ruling was issued that KT Sat co., Ltd. should pay compensation for damages to ABS. However, in October 2017, the Controlling Company and its subsidiary, KT Sat Co., Ltd. filed a lawsuit seeking the cancellation of the partial ruling in the Federal Court of New York, and filed the other lawsuit in May 2018 seeking the cancellation of the final ruling. The Federal Court of New York dismissed the first case in April and the second case in July 2018. The Controlling Company and its subsidiary, KT Sat Co., Ltd. filed an appeal to the US Court of Appeals for the Second Circuit in August 2018. The outcome of the appeal cannot be reasonably estimated at the end of the reporting period.

According to the financial and other covenants included in certain debentures and borrowings, the Group is required to maintain certain financial ratios such as debt-to-equity ratio, use the funds for the designated purpose and report to the creditors periodically. The covenant also contains restriction on provision of additional collateral and disposal of certain assets.

At the end of the reporting period, the Group is offering construction completion guarantee agreement to development of Nonsan Hwagidong apartment complex. If a contingent event occurs in between November 24, 2017 and to August 9, 2019, the Group collaterally guarantees the debt of AbleNS 1st Co. up to ￦6,000 million.

At the end of the reporting period, the Group participates in Algerie Sidi Abdela new town development consortium (percentage of ownership: 2.5%) and has joint liability with other consortium participants.

At the end of the reporting period, contract amount of property and equipment acquisition agreement made but not yet recognized amounts to ￦1,474,009 million (2017: ￦622,059 million).