KeyCorp accepts $500 million of trust preferreds in exchange offer

By Angela McDaniels

Tacoma, Wash., Aug. 5 - KeyCorp said $604 million liquidation preference of trust preferred securities were tendered in the exchange offer it began on July 8.

The offer was limited to $500 million liquidation preference, so the securities have been accepted for exchange on a pro rata basis. The proration factor is 82.8%, according to a company news release.

The company received tenders for the following:

• $71,922,150 liquidation preference of the 5.875% trust preferreds issued by KeyCorp Capital V, $59,545,875 of which was accepted;

• $24,650,500 of the 6.125% trust preferreds issued by KeyCorp Capital VI, $20,408,525 of which was accepted;

• $95,342,550 of the 7% enhanced trust preferreds issued by KeyCorp Capital VIII, $78,936,750 of which was accepted;

• $204,352,875 of the 6.75% enhanced trust preferreds issued by KeyCorp Capital IX, $169,192,175 of which was accepted; and

• $207,645,525 of the 8% enhanced trust preferreds issued by KeyCorp Capital X, $171,916,675 of which was accepted.

For the 8% trust preferreds, holders will receive 4.1518 common shares for each $25.00 liquidation preference of securities tendered by the early deadline and 3.9212 common shares for each security tendered after that time.

For the remaining trust preferreds, holders will receive 4.0596 common shares for each $25.00 liquidation preference of securities tendered by the early deadline and 3.8289 common shares for each security tendered after that time.

The early tender deadline was 11:59 p.m. ET on July 21, the offer ended at 11:59 p.m. ET on Aug. 4, and the settlement date is slated for Aug. 7.

The exchange ratios were set at 9 a.m. ET on Aug. 3. The number of common shares to be exchanged is equal to $22.50 divided by the volume-weighted average price of the company's stock during the five-day period ended July 31 for 8% trust preferreds tendered by the early deadline and $21.25 divided by the average VWAP for tenders after that time.

For the remaining trust preferreds, the exchange ratio is equal to $22.00 divided by the average VWAP for securities tendered by the early tender time and $20.75 divided by the VWAP for tenders after that time.

The VWAP is $5.4193.

KeyCorp expects to issue 81,278,214 shares in the offer and to generate about $507 million of additional tier 1 common equity through the exchanges.

Following the exchanges, the liquidation amount outstanding will be $115,454,125 for the 5.875% trust preferreds, $54,591,475 for the 6.125% trust preferreds, $171,063,250 for the 7% enhanced trust preferreds, $330,807,825 for the 6.75% enhanced trust preferreds and $568,083,325 for the 8% enhanced trust preferreds.

As a result of the exchange offer and previously executed transactions, KeyCorp has generated approximately $2.38 billion of tier 1 common equity in satisfaction of the U.S. government Supervisory Capital Assessment Program's requirement that it raise $1.8 billion.

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

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

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