KeyCorp (KEY) announced offers to exchange $1.3 billion in
preferred securities for cash and common stock, a move which is
part of the Ohio regional bank's effort to raise common-equity
levels by $1.8 billion per the government's recent stress
tests.
The holders of the $503.3 million of series A preferred common
stock would get 7.0992 common shares and $35 for each preferred
share. Those with $797.6 million of preferred-trust securities
would receive stock and a dividend if they tender.
KeyCorp said last month, when the stress test results were
announced, that exchanging preferred stock for common shares was
among the ways it might plug the $1.8 billion hole.
Companies both inside the financial industry, such as Bank of
America Corp. (BAC), and outside, including Dow Chemical Co. (DOW)
have been swapping preferred securities for common stock, in part
to cut dividend payments but also to boost common-equity
levels.
KeyCorp wasn't a big subprime player but expanded aggressively
into hot markets that became deeply troubled and has grappled with
surging loan losses. In April, it swung to a first-quarter loss as
it sharply boosted its loan-loss provisions again and cut its
quarterly dividend 84% to a nominal 1 cent a share.
The company also received $2.5 billion last fall from the
Treasury Department's capital-purchase program.
KeyCorp shares were recently up 4 cents at $4.86. The stock is
down 43% this year.
-By Mike Barris and Kevin Kingsbury, Dow Jones Newswires;
201-938-5658; mike.barris@dowjones.com