KeyCorp said Wednesday that offers to exchange preferred securities for cash and common stock had boosted its common equity by about $540 million, helping the Cleveland bank surpass its goal to raise the $1.8 billion of capital dictated by a government stress test.
The regional banking company, like other companies both inside the financial industry and out, has been swapping preferred securities for common stock in part to cut dividend payments but also to boost its common equity. KeyCorp said in May, when the stress test results were announced, that exchanging preferred shares for common stock was one means it might use to raise the $1.8 billion.
It announced last month an offer to swap $503.3 million of series A preferred common shares and $797.6 million of trust-preferred securities for cash and stock. About 2.1 million shares of preferred stock and $294 million of trust-preferred securities were tendered, it said. Some 2.9 million shares of the series A preferred stock will remain outstanding after the exchange.
KeyCorp is to issue 75.5 million common shares through the exchange offers. It has about 500 million shares outstanding.
The company was not a big subprime player, but it 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 provision and cut its quarterly dividend 84%, to a nominal 1 cent a share.
The company also got $2.5 billion last fall from the Treasury Department's capital-purchase program.