KeyCorp (NYSE: KEY, KEY message board) has been struggling to pass the governmental stress test and their capital raising efforts seem to have finally paid off. The company announced that their latest common stock offering was successful in generating $540 million of Tier 1 common equity.
This addition to the earlier gathered $1.3 billion has finalized KeyCorp's efforts, as the company has become compliant with the stress test requirement of possessing over $1.8 billion in Tier 1 capital. Having gathered additional capital, KeyCorp has assured their survival in case the economy should deteriorate, as modeled in the stress test scenario.
Coping with capital issues has generated a noticeable dilution for the stockholders. In addition to the stock issuance, the company has authorized common stock for preferred securities swaps in order to reduce dividend payments. Such manipulations have prevented their stock price from rising along with the market.
KeyCorp has an outstanding $2.5 billion debt to the U.S. government. Their inability to return to profitability has burdened the repayment of this loan, but the company has been reducing their losses on quarter to quarter basis. This new capital should help to speed up this process, allowing the bank breathe more easily.
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