KeyCorp cuts amount to be exchanged in offer for trust preferreds

By Jennifer Chiou

New York, July 22 - KeyCorp announced changes to the exchange offer to issue common shares for any and all of the 5.875% trust preferreds issued by KeyCorp Capital V, the 6.125% trust preferreds issued by KeyCorp Capital VI, the 7% enhanced trust preferreds issued by KeyCorp Capital VIII, the 6.75% enhanced trust preferreds issued by KeyCorp Capital IX and the $740 million 8% enhanced trust preferreds issued by KeyCorp Capital X.

The company is amending the offer to reduce the amount of trust preferred securities that will be accepted for exchange to a maximum total of $500 million from $1.74 billion. The maximum number of KeyCorp common shares that may be issued in the exchange offer remains unchanged at 158,518,835.

As of July 21, holders of about $534 million aggregate liquidation preference of trust preferred securities had indicated that they would be tendering their holdings. Tenders in excess of the cap will result in acceptances on a pro rata basis.

The exchange ratios will be set at 9 a.m. ET on Aug. 3. The number of common shares to be exchanged will be equal to $22.00 divided by the average volume-weighted average price of the company's stock during a five-day period for tenders of KeyCorp Capital V, KeyCorp Capital VI, KeyCorp Capital VIII and KeyCorp Capital IX securities prior to the early tender time of 11:59 p.m. ET on July 21 and $20.75 divided by the VWAP for tenders after that time.

For the trust preferreds of KeyCorp Capital X, the exchange ratio will be equal to $22.50 divided by the VWAP for early tenders and $21.25 divided by the VWAP for tenders after that time.

The offer ends at 11:59 p.m. ET on Aug. 4. It began on July 8.

The company recently completed exchange offers for its 7.75% non-cumulative perpetual convertible preferred stock, series A as well as the trust preferred securities issued by KeyCorp Capital I, KeyCorp Capital II, KeyCorp Capital III and KeyCorp Capital VII. The prior exchange offers expired at 11:59 p.m. ET on June 30.

KeyCorp said it is looking to further enhance its tier 1 common equity capital through this additional offer.

In the previous offer, the company said that 2,130,461 of the series A preferreds were validly tendered while $294,014,000 aggregate liquidation preference of the trust preferreds were tendered for exchange. Specifically, $42.1 million of the KeyCorp Capital I trust preferreds; $77,229,000 of the KeyCorp Capital II trust preferreds; $86,403,000 of the KeyCorp Capital III trust preferreds; and $88,282,000 of the KeyCorp Capital VII trust preferreds were tendered for exchange.

In all, KeyCorp said it issued in the prior offer 29,232,025 common shares for the tendered series A preferreds. Upon settlement, 2,904,839 shares of the series A preferreds remained outstanding. And, about 46.3 million KeyCorp common shares were issued in exchange for the trust preferreds.

Computershare Trust Co., NA (781 575-2332) is the exchange agent, and D.F. King & Co., Inc. (800 431-9633 or, for bankers and brokers, 212 269-5550) is the information agent.

KeyCorp is the holding company for KeyBank and is based in Cleveland.

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