KeyCorp (NYSE: KEY), which is the third largest bank in Ohio, has survived many challenging market environments. After all, the bank's roots go back to 1825.
However, the latest credit crisis has been particularly tough. Over the past year, the stock price has plunged from $37 to $11.46.
Well, this week, KeyCorp raised $1.65 billion from a common and preferred stock offering. Actually, the company was able to sell 10% more than expected.
Like other banks, KeyCorp binged on loans over the past few years. In fact, a big piece of the lending was for residential real estate construction (especially in California and Florida). Needless to say, those loans are shaky now.
Something else: KeyCorp needs to take a sizable charge for an adverse court ruling because of leveraged lease transactions.
As a result, KeyCorp expects to report a $1.1 billion to $1.2 billion loss for Q2. And, after 43 years of increases in dividends, the company also had to slash its payout by half.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
6-15-2008 @ 4:19AM
Mike Sanders said...
I will pay you on Tuesday, in hamburgers... Wimpy
6-15-2008 @ 11:09AM
CrossProfit said...
The term 'hat-in-hand' means to beg. This is hardly an accurate description as to what transpired.
For a more balanced report of the situation, see:
http://www.crossprofit.com/article.asp?id=167
The issue was over-subscribed suggesting that perhaps management could have gotten a slightly higher price for the preferred. Then again, had there been any problems in raising the cash it would be catastrophic.
Disclosure: No conflicts.
6-15-2008 @ 1:28PM
william lindblad said...
There is not much problem in raising the money as the Fed has made boodles available to the entire commercial bank system. Borrowed, of course, from the taxpayer. This simply tells one that Key has a lot of company. Interestingly enough, now the banks are funding apartment construction. If the trend continues the next hurdle will be a glut of rentals. There are tons of single family rentals that are vacant. Everyone cannot go on section 8.