KeyCorp seeks 5.7% trust preferred holders' consents to cut covenant

By Marisa Wong

Madison, Wis., April 16 - KeyCorp has begun soliciting consents from holders of the 5.7% trust preferred securities of KeyCorp Capital VII to terminate a replacement capital covenant, according to an 8-K filed Monday with the Securities and Exchange Commission.

The replacement capital covenant, originally dated Feb. 27, 2008 and amended on March 3, 2008 and on Feb. 24, 2011, was entered into for the benefit of holders of the 5.7% trust preferreds in connection with the issuance of KeyCorp's 8% junior subordinated debentures due 2068 and KeyCorp Capital X's 8% enhanced trust preferred securities.

Under the terms of the covenant, KeyCorp agreed not to repay, redeem or purchase the 8% debentures due 2068 and the 8% enhanced trust preferreds before March 15, 2048 unless it raises specified funds from the issuance of certain qualifying securities.

If the proposed termination becomes effective, KeyCorp will be able to repay, redeem or purchase any or all of the securities, regardless of whether it has issued any qualifying securities.

The termination of the covenant requires the consent of holders of a majority in liquidation amount of the 5.7% trust preferreds.

Holders must be of record as of April 10 to deliver their consents.

The consent solicitation will expire at 5 p.m. ET on April 27. The solicitation may be terminated before the expiration time if the needed consents are received before then.

KeyCorp will pay a consent fee of $5.00 per $1,000 in liquidation amount of trust preferreds for which a consent is delivered.

Morgan Stanley & Co. LLC (800 624-1808 or 212 761-1057) is the solicitation agent. Deutsche Bank Trust Co. Americas (800 735-7777) is the information and tabulation agent.

KeyCorp is a Cleveland-based financial services company.

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