KeyCorp greenshoe partially exercised, lifts 7.75% convertible preferreds to $657.5 million

By Devika Patel

Knoxville, Tenn., July 11 - Underwriters for KeyCorp's 7.75% non-cumulative perpetual convertible preferred stock exercised their $97.5 million over-allotment option in part for $7.5 million more of the preferreds, increasing the size of the issue to $657.5 million, the company said in an 8-K filed Friday with the Securities and Exchange Commission.

As previously reported, the company sold the series A preferred stock at par of $100 per preferred on June 12 via bookrunner Citigroup. KeyBanc Capital Markets Inc., UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley & Co. Inc. were joint lead managers.

The preferreds have an initial conversion premium of 20% and a conversion price of $14.10, which equals a conversion ratio of 7.0922.

The preferreds are non-callable for five years, with forced conversion thereafter at a price hurdle of 130%.

There are no investor puts, and dividend protection is via a conversion rate adjustment off $0.1875 per quarter dividend threshold amount.

Takeover protection will be via a standard make-whole table. Settlement is via stock only.

Concurrently, KeyCorp priced $1 billion, or 85.106 million common shares, at $11.75 a share.

Proceeds from the offerings are intended to restore capital to strengthen KeyCorp's balance sheet following the accounting charges, and for general corporate purposes.

Cleveland-based KeyCorp is a regional bank.

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