KeyCorp Prices New Preferred

Regional banker KeyCorp (NYSE:KEY) has priced their new fixed rate preferred with an rate of 5.625%.

The issue is rated Baa3 by Moody’s, BB+ by S&P and BB by Fitch–so a split rating either low investment grade or very highly rated non investment grade.

The issue is non-cumulative since it is a bank, but the dividends will be qualified for special tax treatment.

The company is selling 18 million shares and they will become optionally redeemable on 9/15/2024.

The pricing term sheet is here.

Shares are set up to begin trading tomorrow on the OTC Grey market under the temporary ticker KEYLL.

43 thoughts on “KeyCorp Prices New Preferred”

  1. Mikeo, things have been slow lately. I think my last purchase may have been IPWLK last week at 99.75.

    1. That was a nice entry for sure. By the time I had a look at it it was over $100.

      Did you notice EBGEF was back up to 19.97 today?

      1. Mikeo, this issue has been a bit confounding. Where do you find a 6.75% plus QDI investment grade preferred besides from Enbridge. The next divi will yield a 100 basis points higher yield than previous payment. The next divi has not been announced yet. Logic would assume its price would go higher once its yield is officially noticed in front of God and man..Who knows…Im holding long term, that is for sure.

  2. An illiquid, past call 5.6% Baa3 ute preferred, yes… A liquid 5.6% bank preferred? Nyet for me, at par anyways.

    1. i started a small position today as it is qualified div, currently below par and there is not much else on sale.

      1. Schwab can provide a quote for this but cannot accept an online order yet. This seems to be a regular occurrence with them. Any recommendations on a broker that makes it easier to trade these OTC Grey market issues ?

          1. Thanks, that’s great to know. I’ve thought about opening another account somewhere and was considering Fidelity.

            1. I have always found Fidelity useful.. I have an IRA, a 401k and a taxable account there. I transferred money to europe from Fidelity for half the fee Chase charged me. Fidelity also gave me a years worth of trades when i opened my taxable account. The only thing that sometimes irritates me is they block some trades eg., fix to floating securities or securities they view to speculative; in which case you have to call to make the trade.

            2. I left Fidelity because they don’t have fixed to floating after it leaves OTC. You can place order but only by phone and if you want to change limit order, you have to call again

              1. Yeah if you want fixed to float you need to grab them when they first come out in OTC before they get blocked. It seems to take fidelity a couple of weeks to figure out if they want to block a security.

            3. TD is better than Fidelity for online trading. Fidelity has too many restrictions on trading certain issues such as Fixed to Floating preferreds (just one example). However their commission is cheaper than TD ($ 6.99 per trade).

              1. MFZ – I complained to TDAM about commission and told them I was leaving. They lowered commission to $4.95. I’m far from one of their largest customers but it was relatively hassle free. Might be worth a try…

                1. timdman, TDAM: $3.95 and .50/option, but I think we’re supposed to bring chocolate chip cookies in to the local office from time to time.

                    1. timdman the local office reps have latitude not afforded the in-house phone reps. There’s an office near us and I’d stopped in for reasons I cannot recall, though it came up in discussion. Had to add a few $$ but with current valuations, it may be sitting there a while.

        1. Fidelity. I agree this happens too much w schwab. A tip is that fidelity is very open to wheeling and dealing on free trades and cash incentives if you move money from schwab or another broker. Got $1000 and 250 free trades for moving $200k. Another time I did even better.

          1. Since we are comparing brokerages, I thought I would tell a story of an annual exercise I do with my students at college (I serve as Executive in Residence at a business school). We each line up to buy 25 shares of Coca Cola stock via market order on Merril, Fidelity, Schwab, TD, and Scottrade and we hit the buy button at exactly the same time. 7 years in a row the execution on the fidelity order was at the best price, and 7 years in a row the execution on the Merrill platform was the worst price. I don’t think it is a coincidence. So buying these securities where pennies matter, this is why I am a strong advocate for fidelity.

            1. Skg, we fairly regularly are awarded “improvements” on Fidelity trades. In addition, they pay money market rates on idle cash which is accretive over time. The mother-may-I phone calls for opening or expanding ftf positions are a hassle, but in a clinch, one can just use another account. You may want to try trading OTC issues with your students and see what happens as Fidelity has proven horrendous with OTC trades that require Collins Stewart as the market maker. Recently had limit order in for weeks trying to sell low volume KTBA via Fidelity – trades were executing above our ask and we just sat there. Fidelity had no explanation and refused to investigate. After confirming with an SI friend of their much “higher” limit order trade via Schwab for KTBA on same day, sent a note off to FINRA and SEC, cc: Fidelity. My nose is pressed against my front window waiting for the mailman.

              1. Alpha8- good post and I wasn’t aware. The point that I effectively illustrated with the students was that lots of games are played by these market makers. I think the thing every investor should be suspicious about is when the company uses their own imbedded trade desks as is the case of ML. You want independence. I think that is where the hidden games happen.

                1. skg, if I get something substantive back from Finra or the SEC I’ll be sure to share with you. My unfilled trade matters to some degree, though having confidence that the market is fluid enough to trade the highest buy/lowest sell limit orders first is much more important to me. So that you know; my KTBA limit sell, 1st entered on 3/5 was at $27.75. The high trade on 3/21 was $29.90. By sheer coincidence a friend on SI – who shared a copy of his limit sell trade at Schwab – executed at $28.50 also on 3/21. Keep in mind we’re talking about a whopping $2+/share differential from the high trade that day over my long-standing limit order. When presented with the details, Fidelity’s so-called sr. active trader desk at first denied it happened, then indicated the market maker was just making money, and finally then said they did not know why it happened, had no intelligent explanation, would not fill the order and refused to investigate. Plenty disappointing. ergo Finra and SEC.

                  1. I am a frequent player here with this issue also, Alpha. Havent had the misfortune you had. I just bought 500 shares again today at $26.70 as it locked up for a few days. That 6 month interest payment will be payable end of next month and I am hoping that will attract some buying interest again. It has in the past anyways, so I will play it until it doesnt work….Figured there would be a few shares sold as sad sack outfit AT&T had a bad quarterly earnings day today.

        2. Fidelity always lets me buy grey-market issues if I know the ticker. As SteveA noted, they don’t let you buy fixed-to-floating after they begin trading on the regular market. They want to be sure you know what you’re buying or something like that. Since almost all my buying is grey-market, this isn’t a big deal to me.

    2. Gridbird, how about expanding on your comment?

      “An illiquid, past call 5.6% Baa3 ute preferred, yes… A liquid 5.6% bank preferred? Nyet for me, at par anyways.”

      Seems to me that 5.6% is 5.6% no matter where it comes from. What am I missing?

      1. On the surface it would appear that way. But in reality it doesnt work that way. Past call higher quality illiquids are anchored more to par. I saw this inrelation to back side price support not upside potential. Look at all the old 4% illiquid ute preferreds anchored around par despite a low yield.

        1. That is a great, great point Gridbird. I’m still in on this issue because despite the meh rating, KeyCorp is in very good shape, it’s highly unlikely they are going to miss any payments and the Fed appears at least somewhat inclined to cut interest rates (a good thing for all preferred investors) or just introduce one more slight interest rate rise, giving us probably a good year and a half run w/out worrying about rising rates driving down prices.

          1. Franklin, I guess I should add its not that I am scared of the issue, its just not one that would improve on what I own since I am fully invested. I dont have money needing a home unless I sell to improve upon what I presently have.

            1. Dang it Grid, we novices need you to be active in the market so we can learn from you. Lighten up your holdings and get to it! 😉

            2. Yeah Grid, sell me your FIISO and DMRRP immediately… to put these illiquid out of the pain of holding them 😛

              1. Nomad, I flipped out of DMRRP when someone offered me $6 more dollars than I paid for them last year. I kind of miss it admittedly. The FIISO will never be for sale though. That is 8% plus gold QDI for me. 🙂

                1. Grid, I’m more than happy to take over any and all of your FIISO shares, whenever you feel the need to divest yourself and use the funds for more exciting investments like Netflix, lol.

                  1. Inspbudget, Remember when I emailed you to tell you that they were available to buy and you got them? What the hell was I thinking? I should have just bought them all!!! 😃

                2. Grid, the rich history of DMRRP is unfortunately lost on many investors. I was always intrigued by it, as I have a piece of land that has an ancient (built in the 1850’s) railroad that is rarely used in the rear of the property and now is owned by CSX. The old owner told me that the rail was used as part of the Underground Railroad. As you know, CSX is the “owner” of DMRRP and there was incredible amounts of legislation that went up to the Supreme Court to classify what rights or liabilities preferred shareholders had. I use to have 1 share and kick myself that I put it into an estate account that I am no long a part too (long story). I have been trying to buy FIISO and DMRRP for many many years with no luck and hope one day there is a seller…
                  Be well my friend, Nomad

            3. Makes total sense, Gridbird. I’m still moving money in. Now because of your explanation I can expand what I consider. Much thanks.

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