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Filed pursuant to Rule 424(b)(3)
Registration Statement No. 333-63104
PROSPECTUS
KEYCORP
7% SERIES C SENIOR NOTES DUE MAY 11, 2005
FLOATING RATE SERIES D SENIOR NOTES DUE DECEMBER 10, 2001
FLOATING RATE SERIES D SENIOR NOTES DUE MAY 30, 2002
FLOATING RATE SERIES E SENIOR NOTES DUE JULY 26, 2001
FLOATING RATE SERIES E SENIOR NOTES DUE OCTOBER 24, 2001
FLOATING RATE SERIES E SENIOR NOTES DUE OCTOBER 30, 2001
FLOATING RATE SERIES E SENIOR NOTES DUE NOVEMBER 21, 2001
8.125% SUBORDINATED NOTES DUE JUNE 15, 2002
7.61% SUBORDINATED NOTES, SERIES IV, DUE SEPTEMBER 9, 2002
7.63% SUBORDINATED NOTES, SERIES IV, DUE SEPTEMBER 15, 2002
7.46% SUBORDINATED NOTES, SERIES IV, DUE SEPTEMBER 25, 2002
7.53% SUBORDINATED NOTES, SERIES IV, DUE SEPTEMBER 30, 2002
7.3% SUBORDINATED NOTES, SERIES IV, DUE FEBRUARY 3, 2003
8% SUBORDINATED NOTES DUE JULY 1, 2004
6.75% SUBORDINATED SERIES B NOTES DUE MARCH 15, 2006
7.5% SUBORDINATED SERIES B NOTES DUE JUNE 15, 2006
The outstanding securities of KeyCorp listed above have been registered
under the Securities Act of 1933.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
These securities are not deposits or savings accounts but are unsecured
obligations of KeyCorp. These securities are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund, the Bank
Insurance Fund or any other governmental agency.
One or more broker-dealer affiliates of KeyCorp, including McDonald
Investments Inc., expect to offer and sell the outstanding securities as part of
their business, and may act as a principal or agent in such transactions. These
broker-dealer affiliates may use this prospectus in connection with these
activities.
MCDONALD INVESTMENTS INC.
A KEYCORP COMPANY
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June 27, 2001
KEYCORP LOGO
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TABLE OF CONTENTS
PAGE
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Forward-Looking Statements.................................. 2
KeyCorp..................................................... 3
Selected Consolidated Financial Data........................ 5
Ratio of Earnings to Fixed Charges.......................... 7
Use of Proceeds............................................. 7
Description of the Outstanding Securities................... 8
Market-Making Activities.................................... 19
ERISA Matters............................................... 19
Legal Opinions.............................................. 19
Experts..................................................... 20
Where You Can Find More Information......................... 20
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You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different or additional information. If anyone provides you with
different or additional information, you should not rely on it. We are not, and
our broker-dealer affiliates are not, making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in or incorporated by reference in this
prospectus is accurate as of its date only. Our business, financial condition,
results of operations and prospects may have changed since that date.
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FORWARD-LOOKING STATEMENTS
This prospectus may contain "forward-looking statements" about issues like
anticipated cost savings and revenue growth, and the anticipated reduction in
our employment base. Forward-looking statements by their nature are subject to
assumptions, risks and uncertainties. For a variety of reasons, including the
following, actual results could differ materially from those contained in or
implied by the forward-looking statements:
- Interest rates could change more quickly or more significantly than we
expect.
- If the economy or segments of the economy continue to slow, the demand
for new loans and the ability of borrowers to repay outstanding loans may
decline.
- The stock and bond markets could suffer a disruption, which may have a
negative effect on our financial condition and that of our borrowers, and
on our ability to raise money by issuing new securities.
- It could take us longer than we anticipate to implement strategic
initiatives designed to increase revenues or manage expenses, or we may
be unable to implement those initiatives at all.
- Acquisitions and dispositions of assets, business units or affiliates
could affect us in ways that management has not anticipated.
- We may become subject to new legal obligations, or the resolution of
pending litigation may have a negative effect on our financial condition.
- We may become subject to new and unanticipated accounting, tax, or
regulatory practices or requirements.
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KEYCORP
OVERVIEW
KeyCorp, incorporated in 1958 under the laws of the State of Ohio and
registered under the Bank Holding Company Act of 1956, is headquartered in
Cleveland, Ohio. At March 31, 2001, we were one of the largest integrated
multiline financial services companies in the United States with consolidated
total assets of $86.5 billion. Our subsidiaries provide a wide range of
investment management, retail and commercial banking, consumer finance and
investment banking products and services to corporate, individual and
institutional clients through three lines of business: Key Consumer Banking, Key
Corporate Finance and Key Capital Partners.
As of March 31, 2001, these services were provided across much of the
country through subsidiaries operating 922 full-service banking offices
("KeyCenters") in 13 states, a 24-hour telephone banking call center services
group and more than 2,400 automated teller machines ("ATMs"). At March 31, 2001,
we, together with our subsidiaries, had approximately 21,882 full-time
equivalent employees.
We are a legal entity separate and distinct from our banking and other
subsidiaries. Accordingly, our rights and the rights of our security holders and
creditors to participate in any distribution of the assets or earnings of our
banking and other subsidiaries is necessarily subject to the prior claims of the
respective creditors of our banking and other subsidiaries, except to the extent
that our claims in our capacity as a creditor of our banking and other
subsidiaries may be recognized.
Our principal executive office is located at 127 Public Square, Cleveland,
Ohio 44114-1306. Our telephone number is (216) 689-6300.
SUBSIDIARIES
Our largest banking subsidiaries are:
- KeyBank National Association, headquartered in Cleveland, Ohio -- the
12th largest bank in the United States at December 31, 2000, based on
asset size. At March 31, 2001, KeyBank had $76.7 billion in total assets
and 922 branches in Alaska, Colorado, Idaho, Indiana, Maine, Michigan,
New Hampshire, New York, Ohio, Oregon, Utah, Vermont and Washington; and
- Key Bank USA, National Association, headquartered in Cleveland, Ohio,
with total assets of $7.0 billion at March 31, 2001. Key Bank USA is
involved in consumer loan activities.
In addition to the customary banking services of accepting deposits and
making loans, our bank and trust company subsidiaries provide specialized
services, including personal and corporate trust services, personal financial
services, customer access to mutual funds, cash management services, investment
banking and capital markets products and international banking services. Through
our subsidiary banks, trust company and registered investment adviser
subsidiaries, we provide investment management services to individual and
institutional clients, including large corporate and public retirement plans,
foundations and endowments, high-net-worth individuals and Taft-Hartley plans
(i.e., multiemployer trust funds established under applicable law). In addition,
investment management subsidiaries serve as investment advisers to proprietary
mutual funds offered by our other affiliates.
MAJOR LINES OF BUSINESS
A description of KeyCorp's and its subsidiaries' (collectively "Key") major
lines of business as of March 31, 2001, is as follows:
Key Consumer Banking. Key Consumer Banking is a national organization that
offers consumers a full array of deposit, investment, credit and personal
finance services. Newly created, it combines Key's retail banking and consumer
finance activities. One of its divisions, Retail Banking, delivers a complete
line of branch-based financial products and services to consumers through 922
KeyCenters. These KeyCenters are operated by relationship managers supported by
a 24-hour telephone banking call center
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services group, 2,424 ATMs that access 15 different networks (resulting in one
of the largest ATM networks in the United States), and a leading-edge Internet
banking service, Key.com. Home Equity and Consumer Finance, the other division
in Key Consumer Banking, offers indirect, non-branch-based consumer loan
products, including automobile loans and leases, home equity loans, education
loans, and marine and recreational vehicle loans. As of December 31, 2000, based
on the volume of loans generated, Home Equity and Consumer Finance was one of
the foremost lenders for education, for automobile purchases and leases, and for
purchases of marine and recreational vehicles in the United States.
Key Corporate Finance. Key Corporate Finance offers a complete range of
financing, transaction processing, electronic commerce and financial advisory
services to corporations nationwide. As of December 31, 2000, it ranks
nationally among the top 10 banks in providing financial services to the media
and telecommunications, commercial real estate and healthcare industries. Across
Key's 13-state franchise, its commercial banking unit has a dominant market
share with middle markets and small business segment companies. It operates one
of the world's largest bank-affiliated equipment leasing companies, with
operations in the Americas, Europe, Asia and the Pacific Rim. Based on total
transaction volume, Key Corporate Finance is one of the leading cash management
providers in the United States. This line of business also serves the needs of
Key's small business clients.
Key Corporate Finance's business units are organized around six specialized
industry client segments: commercial banking, commercial real estate, lease
financing, healthcare, media/telecommunications and technology. These targeted
client segments can receive a number of specialized services, including
international banking, cash management and corporate finance advisory services.
Key Corporate Finance also offers investment banking, capital markets, 401(k)
and trust custody products in cooperation with Key Capital Partners.
Key Capital Partners. Key Capital Partners provides asset management,
employee benefits services, brokerage services, investment banking, capital
markets and insurance expertise to clients throughout the United States and
internationally. It also conducts equity capital investing and offers
specialized services to high-net-worth clients through the wealth management and
private banking businesses. Key Capital Partners employs a range of distribution
outlets, including those of Key's other lines of business.
RECENT DEVELOPMENTS
On May 17, 2001, KeyCorp announced that it expects to incur $402 million of
after-tax charges in the second quarter of 2001. Of this amount, $150 million is
the non-cash write-down of goodwill associated with KeyCorp's 1995 acquisition
of AutoFinance Group and $252 million relates to after-tax cash charges
identified as follows:
auto finance business exit costs $27 million
loan loss reserves $189 million
accounting change $23 million
miscellaneous $13 million
The loan loss reserves are being increased to facilitate exiting and
resolving non-relationship lending in the leveraged financing and nationally
syndicated businesses. The one-time after-tax charge of $23 million relates to
an accounting change on retained interests in securitized assets.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated financial data which has
been derived from, and should be read in conjunction with, the consolidated
financial statements, the notes thereto and the other financial information
pertaining to KeyCorp incorporated by reference herein. This summary is
qualified in its entirety by reference to the detailed information and financial
statements included in the documents incorporated by reference under "Where You
Can Find More Information" on page 20. The data presented for the years ended
December 31, 2000, 1999, 1998, 1997 and 1996 (except for ratios) are derived
from our audited consolidated financial statements. The data presented for the
three-month periods ended March 31, 2001 and 2000 have been derived from our
unaudited consolidated financial statements and are not necessarily indicative
of the data for the entire year. These interim financial statements include, in
the opinion of management, all adjustments of a normal recurring nature and
disclosures which are necessary to present fairly the data for such interim
periods. The comparability of the data presented is affected by certain
acquisitions and divestitures that KeyCorp and its subsidiaries have completed
in the time periods presented. Some previously reported results have been
reclassified to conform to the current presentation.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
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2001 2000 2000 1999 1998 1997 1996
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(UNAUDITED) [AUDITED (EXCEPT RATIOS)]
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FOR THE PERIOD
Interest income.................... $1,570 $1,489 $6,277 $5,695 $5,525 $5,262 $4,951
Interest expense................... 882 818 3,547 2,908 2,841 2,517 2,237
Net interest income................ 688 671 2,730 2,787 2,684 2,745 2,714
Provision for loan losses.......... 110 183 490 348 297 320 197
Noninterest income................. 455 806 2,194 2,315 1,600 1,315 1,090
Noninterest expense................ 698 727 2,917 3,070 2,508 2,395 2,464
Income before income taxes, and
cumulative effect of accounting
change........................... 335 567 1,517 1,684 1,479 1,345 1,143
Income before cumulative effect of
accounting change................ 218 367 1,002 1,107 996 919 783
Net income......................... 217 367 1,002 1,107 996 919 783
Net income applicable to common
shares........................... 217 367 1,002 1,107 996 919 775
PER COMMON SHARE
Income before cumulative effect of
accounting change................ $.51 $.83 $2.32 $2.47 $2.25 $2.09 $1.69
Income before cumulative effect of
accounting change -- assuming
dilution......................... .51 .83 2.30 2.45 2.23 2.07 1.67
Net income......................... .51 .83 2.32 2.47 2.25 2.09 1.69
Net income -- assuming dilution.... .51 .83 2.30 2.45 2.23 2.07 1.67
Cash dividends..................... .295 .28 1.12 1.04 .94 .84 .76
Book value at period end........... 15.79 14.84 15.65 14.41 13.63 11.83 10.92
Market price:
High........................... 27.58 22.25 28.50 38.13 44.88 36.59 27.13
Low............................ 22.65 15.56 15.56 21.00 23.38 23.94 16.69
Close.......................... 25.80 19.00 28.00 22.13 32.00 35.41 25.25
Weighted average common
shares(000)...................... 424,024 441,834 432,617 448,168 441,895 439,042 459,810
Weighted average common shares and
potential common shares(000)..... 429,917 443,757 435,573 452,363 447,437 444,544 464,282
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THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
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2001 2000 2000 1999 1998 1997 1996
-------- -------- ------- ------- ------- ------- -------
(UNAUDITED) [AUDITED (EXCEPT RATIOS)]
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT PERIOD END
Loans.............................. $67,027 $64,064 $66,905 $64,222 $62,012 $53,380 $49,235
Earning assets..................... 77,027 73,953 77,316 73,733 70,240 64,246 59,260
Total assets....................... 86,457 83,504 87,270 83,395 80,020 73,699 67,621
Deposits........................... 45,965 46,036 48,649 43,233 42,583 45,073 45,317
Long-term debt..................... 14,495 14,784 14,161 15,881 12,967 7,446 4,213
Capital securities................. 1,308 1,243 1,243 1,243 997 750 500
Total shareholders' equity......... 6,702 6,493 6,623 6,389 6,167 5,181 4,881
PERFORMANCE RATIOS
Return on average total assets..... 1.02% 1.77% 1.19% 1.37% 1.32% 1.33% 1.21%
Return on average common equity.... 13.28 22.68 15.39 17.68 17.97 18.89 15.73
Return on average total equity..... 13.28 22.68 15.39 17.68 17.97 18.89 15.64
Net interest margin (taxable
equivalent)...................... 3.63 3.68 3.69 3.93 4.08 4.54 4.78
CAPITAL RATIOS AT PERIOD-END
Equity to assets................... 7.75% 7.78% 7.59% 7.66% 7.71% 7.03% 7.22%
Tangible equity to tangible
assets........................... 6.29 6.16 6.12 6.03 5.93 5.52 5.88
Tier I risk-adjusted capital....... 7.99 7.98 7.72 7.68 7.21 6.65 7.98
Total risk-adjusted capital........ 12.32 12.04 11.48 11.66 11.69 10.83 13.01
Leverage........................... 7.79 7.89 7.71 7.77 6.95 6.40 6.93
ASSET QUALITY DATA
Nonperforming loans................ $713 $473 $650 $447 $384 $385 $349
Nonperforming assets............... 740 497 672 473 423 435 400
Allowance for loan losses.......... 1,001 979 1,001 930 900 900 870
Net loan charge-offs............... 109 134 414 318 297 293 195
Nonperforming loans to period-end
loans............................ 1.06% .74% .97% .70% .62% .72% .71%
Nonperforming assets to period-end
loans plus OREO and other
nonperforming assets............. 1.10 .78 1.00 .74 .68 .81 .81
Allowance for loan losses to
nonperforming loans.............. 140.39 206.98 154.00 208.05 234.38 233.77 249.28
Allowance for loan losses to
period-end loans................. 1.49 1.53 1.50 1.45 1.45 1.69 1.77
Net loan charge-offs to average
loans............................ .66 .84 .63 .51 .52 .57 .40
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratios of earnings to fixed
charges and preferred stock dividends for each of the years in the five-year
period ended December 31, 2000, and for each of the three-month periods ended
March 31, 2001 and 2000.
For the purpose of calculating the ratio of earnings to fixed charges and
preferred stock dividends, we divided consolidated income before income taxes
and cumulative effect of accounting change, plus fixed charges by fixed charges.
Fixed charges consist of:
- consolidated interest expense, excluding or including interest on
deposits, as the case may be; and
- that portion of rental expense that is deemed representative of the
interest factor, net of income from subleases.
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
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2001 2000 2000 1999 1998 1997 1996
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RATIO OF EARNINGS TO FIXED CHARGES
Excluding deposit interest............. 1.78x 2.26x 1.83x 2.02x 1.97x 2.24x 2.41x
Including deposit interest............. 1.38x 1.68x 1.42x 1.57x 1.51x 1.53x 1.50x
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
Excluding deposit interest............. 1.78x 2.26x 1.83x 2.02x 1.97x 2.24x 2.38x
Including deposit interest............. 1.38x 1.68x 1.42x 1.57x 1.51x 1.53x 1.49x
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the outstanding
securities. All offers and sales of outstanding securities pursuant to this
prospectus will be for the accounts of the broker-dealer affiliates of KeyCorp
in connection with market-making transactions.
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DESCRIPTION OF THE OUTSTANDING SECURITIES
The outstanding debt securities of KeyCorp covered by this prospectus were
issued under the following indentures:
- Indenture regarding senior debt securities between KeyCorp and Bankers
Trust Company, dated June 10, 1994
- Indenture regarding subordinated debt securities between KeyCorp and
Bankers Trust Company, dated June 10, 1994
- Indenture regarding subordinated debt securities between KeyCorp and
Chemical Bank dated January 1, 1985, as amended by a First Supplemental
Indenture dated as of December 31, 1989, a Second Supplemental Indenture
dated as of June 29, 1992, a Third Supplemental Indenture dated as of
November 19, 1992 and a Fourth Supplemental Indenture dated March 1, 1994
- Indenture regarding subordinated debt securities between Society
Corporation (now KeyCorp) and Morgan Guaranty Trust Company of New York
dated June 15, 1992 (Bankers Trust Company is the successor trustee), as
amended by a First Supplemental Indenture dated December 15, 1992.
Unless otherwise indicated, when we refer to the "trustee" in this
prospectus, we mean one or all of the banking institutions indicated above, in
their capacity as trustee under the related indentures.
Each of the indentures has been filed with the SEC and is incorporated by
reference in the registration statement of which this prospectus forms a part.
The following briefly summarizes certain provisions of the outstanding
securities and the indentures. You should read the more detailed provisions of
the applicable indenture, including the defined terms, for provisions that may
be important to you.
TERMS OF THE OUTSTANDING SECURITIES
INDENTURE REGARDING SENIOR DEBT SECURITIES BETWEEN KEYCORP AND BANKERS
TRUST COMPANY, DATED AS OF JUNE 10, 1994.
PRINCIPAL INTEREST RECORD DATES FOR
TITLE OF SERIES (RANKING) MATURITY DATE INTEREST RATE AMOUNT PAYMENT DATE INTEREST PAYMENT
- ------------------------- ------------------ --------------- ------------ ------------------- -------------------
7.0% Series C
Senior Notes due May 11,
2005................... May 11, 2005 7.0% $ 3,301,000 May 11 and November April 15 and
11 October 15
Floating Rate Series D
Senior Notes due
December 10, 2001(1)... December 10, 2001 3 month LIBOR + $100,000,000 March 8, June 8, February 21, May
.08% September 8 and 24, August 24 and
December 8 November 23
Floating Rate Series D
Senior Notes due May 30,
2002(1)................ May 30, 2002 3 month LIBOR + $100,000,000 February 28, May February 13, May
.12.5% 30, August 30 and 15, August 15 and
November 30 November 15
Floating Rate Series E
Senior Notes due
November 21, 2001(1)... November 21, 2001 3 month LIBOR - $150,000,000 February 21, May February 6, May 6,
.01% 21, August 21 and August 6 and
November 21 November 6
Floating Rate Series E
Senior Notes due
October 30, 2001(1)... October 30, 2001 3 month LIBOR $ 50,000,000 January 30, April January 15, April
30, July 30 and 15, July 15 and
October 30 October 15
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PRINCIPAL INTEREST RECORD DATES FOR
TITLE OF SERIES (RANKING) MATURITY DATE INTEREST RATE AMOUNT PAYMENT DATE INTEREST PAYMENT
- ------------------------- ------------------ --------------- ------------ ------------------- -------------------
Floating Rate Series E
Senior Notes due
October 24, 2001(1)... October 24, 2001 3 month LIBOR $200,000,000 January 24, April January 9, April 9,
24, July 24 and July 9 and October
October 24 9
Floating Rate Series E
Senior Notes due
July 26, 2001(1)...... July 26, 2001 3 month LIBOR $150,000,000 January 26, April January 11, April
-.03% 26, July 26 and 11, July 11 and
October 26 October 11
INDENTURE REGARDING SUBORDINATED NOTES BETWEEN KEYCORP AND BANKERS TRUST
COMPANY DATED JUNE 10, 1994.
PRINCIPAL INTEREST RECORD DATES FOR
TITLE OF SERIES (RANKING) MATURITY DATE INTEREST RATE AMOUNT PAYMENT DATE INTEREST PAYMENT
- ------------------------- ------------------ --------------- ------------ ------------------- -------------------
7.5% Subordinated
Series B Notes due
June 15, 2006.......... June 15, 2006 7.5% $250,000,000 June 15 and May 31 and November
December 15 30
6.75% Subordinated
Series B Notes due March
15, 2006............... March 15, 2006 6.75% $200,000,000 March 15 and February 28 and
September 15 August 31
INDENTURE REGARDING SUBORDINATED NOTES BETWEEN KEYCORP AND CHEMICAL BANK
DATED JANUARY 1, 1985, AS AMENDED BY A FIRST SUPPLEMENTAL INDENTURE DATED AS OF
DECEMBER 31, 1989, A SECOND SUPPLEMENTAL INDENTURE DATED AS OF JUNE 29, 1992, A
THIRD SUPPLEMENTAL INDENTURE DATED AS OF NOVEMBER 19, 1992 AND A FOURTH
SUPPLEMENTAL INDENTURE DATED AS OF MARCH 1, 1994.
PRINCIPAL INTEREST RECORD DATES FOR
TITLE OF SERIES (RANKING) MATURITY DATE INTEREST RATE AMOUNT PAYMENT DATE INTEREST PAYMENT
- ------------------------- ------------------ --------------- ------------ ------------------- -------------------
7.3% Subordinated Notes,
Series IV, due February
3, 2003................ February 3, 2003 7.3% $ 45,000,000 March 15 and February 28 and
September 15 August 31
7.53% Subordinated
Notes, Series IV, due
September 30, 2002..... September 30, 2002 7.53% $ 12,000,000 March 15 and February 28 and
September 15 August 31
7.46% Subordinated
Notes, Series IV, due
September 25, 2002..... September 25, 2002 7.46% $ 10,000,000 March 15 and February 28 and
September 15 August 31
7.63% Subordinated
Notes, Series IV, due
September 15, 2002..... September 15, 2002 7.63% $ 8,000,000 March 15 and February 28 and
September 15 August 31
7.61% Subordinated
Notes, Series IV, due
September 9, 2002...... September 9, 2002 7.61% $ 10,000,000 March 15 and February 28 and
September 15 August 31
8% Subordinated Notes
due July 1, 2004....... July 1, 2004 8% $125,000,000 January 1 and July December 15 and
1 June 15
INDENTURE REGARDING SUBORDINATED NOTES BETWEEN SOCIETY CORPORATION (NOW
KEYCORP) AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK DATED JUNE 15, 1992.
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PRINCIPAL INTEREST RECORD DATES FOR
TITLE OF SERIES (RANKING) MATURITY DATE INTEREST RATE AMOUNT PAYMENT DATE INTEREST PAYMENT
- ------------------------- ------------------ --------------- ------------ ------------------- -------------------
8.125% Subordinated
Notes due June 15,
2002................... June 15, 2002 8.125% $200,000,000 June 15 and June 1 and December
December 15 1
- ---------------
(1) The rate of interest for this series of debt securities is determined for
each interest period on the second London Banking Day preceding the relevant
Reset Date (as defined below). The calculation agent determines LIBOR for
these debt securities for an interest period by obtaining the rate for
deposits in United States dollars having the index maturity of three months
that appears on Telerate Page 3750, as of 11:00 A.M., London Time, on the
day that is two London Banking Days preceding that Reset Date. The Reset
Date is the first day of an interest period.
GLOBAL SECURITIES; BOOK-ENTRY PROCEDURES AND SETTLEMENT
The securities are book-entry securities. All book-entry securities of the
same issue are represented by one or more fully registered global securities,
without interest coupons. Each global security is deposited with, or on behalf
of, The Depository Trust Company, New York, New York, known as "DTC", and is
registered in the name of DTC or a nominee of DTC. DTC is thus the only
registered holder of the securities and is considered the sole owner of the
securities for purposes of the indentures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
banking law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under section 17A of the Securities Exchange Act of 1934. The
rules applicable to DTC and its participants are on file with the SEC.
Purchasers of securities in the United States may only hold interests in
the global securities through DTC if they are participants in the DTC system.
Purchasers may also hold interests through a securities intermediary - banks,
brokerage houses and other institutions that maintain securities accounts for
customers - that has an account with DTC or its nominee.
The securities of each beneficial owner of a book-entry security are
evidenced solely by entries on the books of the beneficial owner's securities
intermediary. The actual purchaser of the securities is generally not entitled
to have the securities represented by the global securities registered in its
name and is not considered the owner under the indenture. In most cases, a
beneficial owner is also not able to obtain a paper certificate evidencing the
holder's ownership of securities. The book-entry system for holding securities
eliminates the need for physical movement of certificates and is the system
through which most publicly traded common stock is held in the United States.
However, the laws of some jurisdictions require some purchasers of securities to
take physical delivery of their securities in definitive form. These laws may
impair the ability to transfer book-entry securities.
Special Considerations for Global Securities. As an indirect holder, an
investor's rights relating to a global security will be governed by the account
rules of the investor's financial institution and of the depositary, as well as
general laws relating to securities transfers. The depositary that holds the
global security will be considered the holder of the debt securities represented
by the global security.
If debt securities are issued only in the form of a global security, an
investor should be aware of the following:
- An investor cannot cause the debt securities to be registered in his or
her name, and cannot obtain non-global certificates for his or her
interest in the debt securities, except in the special situations we
describe below.
- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the debt securities and protection of his
or her legal rights relating to the debt securities.
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- An investor may not be able to sell interests in the debt securities to
some insurance companies and other institutions that are required by law
to own their securities in non-book-entry form.
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the debt
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective.
- The depositary's policies, which may change from time to time, will
govern payments, transfers, exchanges and other matters relating to an
investor's interest in a global security. We and the trustee have no
responsibility for any aspect of the depositary's actions or for its
records of ownership interests in a global security. We and the trustee
also do not supervise the depositary in any way.
- DTC requires that those who purchase and sell interests in a global
security deposited in its book-entry system use immediately available
funds. Your broker or bank may also require you to use immediately
available funds when purchasing or selling interests in a global
security.
- Financial institutions that participate in the depositary's book-entry
system, and through which an investor holds its interest in a global
security, may also have their own policies affecting payments, notices
and other matters relating to the debt security. There may be more than
one financial intermediary in the chain of ownership for an investor. We
do not monitor and are not responsible for the actions of any of those
intermediaries.
Special Situations when a Global Security Will Be Terminated. In a few
special situations described below, a global security will be terminated and
interests in it will be exchanged for certificates in non-global form
(certificated securities). After that exchange, the choice of whether to hold
the certificated debt securities directly or in street name will be up to the
investor. Investors must consult their own banks or brokers to find out how to
have their interests in a global security transferred on termination to their
own names, so that they will be holders.
The special situations for termination of a global security are as follows:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security, and we do
not appoint another institution to act as depositary within 60 days;
- if we notify the trustee that we wish to terminate that global security;
or
- if an Event of Default has occurred with regard to the debt securities
represented by that global security and has not been cured or waived; we
discuss defaults later under "Events of Default".
If a global security is terminated, only the depositary, and not we or the
applicable trustee, is responsible for deciding the names of the institutions in
whose names the debt securities represented by the global security will be
registered and, therefore, who will be the holders of those debt securities.
RANKING
Senior Debt
Each series of senior debt securities is part of KeyCorp's superior
indebtedness ranking on a parity with all other outstanding senior debt.
KeyCorp's subordinated debt securities are subordinated, as to payment of
principal, premium, if any, and interest, if any, to all of KeyCorp's other
liabilities, including senior debt securities.
Subordination Provisions. Each series of subordinated debt securities is
subordinate and junior in right of payment to all Senior Indebtedness (defined
below) and in certain circumstances relating to our insolvency, bankruptcy, or
similar case or proceeding, or our liquidation, dissolution or winding up (an
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"insolvency event") to all Other Senior Obligations (defined below). In
addition, we may make no payments on the subordinated debt securities in the
event:
- we default in any payment on any Senior Indebtedness, or an event of
default on any Senior Indebtedness permitting the holders to accelerate
its maturity exists; or
- a judicial proceeding is pending with respect to such default or event of
default.
"Senior Indebtedness" as used in the subordinated indentures means the
principal of, and premium, if any, and interest on:
- all indebtedness of KeyCorp for money borrowed, whether outstanding on
the date of execution of the subordinated indenture, or created,
assumed, incurred or guaranteed after that date, except (i)
subordinated debt securities issued under the subordinated indenture,
Existing Subordinated Indebtedness and all indebtedness which
specifically by its terms ranks equally with and not prior to the
subordinated debt securities or the Existing Subordinated Indebtedness
in right of payment upon the happening of an insolvency event, and
(ii) indebtedness which ranks junior to and not equally with or prior
to the indebtedness referred to in clause (i) above in right of
payment upon the happening of an insolvency event.
- any renewals, extensions, modifications and refundings of any such
Senior Indebtedness.
The term "indebtedness of KeyCorp for money borrowed" means the principal
of, premium, if any, and interest, if any, on all:
- our indebtedness, including indebtedness of others guaranteed by us,
whether outstanding on the date of the subordinated indenture or
created incurred assumed or guaranteed after that date, which is for
money borrowed; and
- any renewals, extensions, modifications and refundings of any such
indebtedness.
"Other Senior Obligations" means any of our obligations to our creditors,
whether outstanding on the date of execution of the subordinated indenture or
created, assumed, incurred or guaranteed after that date, except:
- Senior Indebtedness;
- subordinated debt securities issued under the subordinated indenture,
Existing Subordinated Indebtedness (defined below) and all
indebtedness which specifically by its terms ranks equally with and
not prior to the subordinated debt securities or the Existing
Subordinated Indebtedness in right of payment upon the happening of an
insolvency event; and
- indebtedness which ranks junior to and not equally with or prior to
indebtedness referred to in the clause above in right of payment upon
any insolvency event.
The subordinated indentures do not limit or prohibit the incurrence of
additional Senior Indebtedness or Other Senior Obligations, and additional
Senior Indebtedness may include indebtedness for money borrowed that is senior
to the subordinated debt securities, but subordinated to other obligations.
Existing Subordinated Indebtedness. The subordinated indentures provide
that the subordinated debt securities do not constitute "senior indebtedness" as
defined in the indentures governing the Society Subordinated Indebtedness and
the Old KeyCorp Subordinated Indebtedness. Accordingly, the subordinated debt
securities will not have the benefit of the subordination provisions contained
in such indentures.
All of the Existing Subordinated Indebtedness originally issued by Old
KeyCorp, a New York corporation ("Old KeyCorp"), and assumed by us as a result
of the merger of Old KeyCorp into Society Corporation on March 1, 1994 is
referred to as "Old KeyCorp Subordinated Indebtedness". All of the Existing
Subordinated Indebtedness originally issued by Society Corporation, our
predecessor, is referred to as "Society Subordinated Indebtedness". "Existing
Subordinated Indebtedness" includes all of our indebtedness for borrowed money
under our 8.125% Subordinated Notes due June 15, 2002 (originally
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issued by Society Corporation), 8.00% Subordinated Notes due July 1, 2004
(originally issued by Old KeyCorp and assumed by us), Medium-Term Notes Series
IV due 2002 and 2003 (originally issued by Old KeyCorp and assumed by us), and
any renewals, extensions, modifications and refundings of any such indebtedness.
Because the Old KeyCorp Subordinated Indebtedness and the Society
Subordinated Indebtedness were issued by Old KeyCorp and Society Corporation,
respectively, prior to the merger of Old KeyCorp and Society Corporation, the
relationship between the Old KeyCorp Subordinated Indebtedness and the Society
Subordinated Indebtedness is not expressly provided for in the respective
indentures relating to such indebtedness.
Tier II Capital Debt Securities. In 1992, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") issued an interpretation
(the "Interpretation") of its capital adequacy regulations that imposed
additional restrictions on subordinated debt securities in order for these
securities to qualify as Tier II capital. The Interpretation provides that
subordinated debt of bank holding companies issued on or after September 4, 1992
cannot qualify as Tier II capital unless the subordination of the debt meets
certain criteria, the subordinated debt is not subject to covenants and other
provisions inconsistent with safe and sound banking practices and the
subordinated debt may be accelerated only upon the bankruptcy of the bank
holding company or the receivership of a major banking subsidiary.
All of the Old KeyCorp Subordinated Indebtedness and the Society
Subordinated Indebtedness, which were incurred by Old KeyCorp and Society,
respectively, prior to the issuance of the Interpretation, continued to
constitute, and be treated by us as, Tier II capital.
Insolvency Event. Upon the happening of an insolvency event, the payment of
principal of, premium, if any, or interest, if any, on the subordinated debt
securities and the Existing Subordinated Indebtedness is subordinated to the
payment in full to the holders of the Senior Indebtedness. In addition, upon any
payment to creditors upon an insolvency event, the holders of Other Senior
Obligations will be paid first before the holders of the Old KeyCorp
Subordinated Indebtedness on any principal of and interest on the Old KeyCorp
Subordinated Indebtedness.
If, after we have made those payments on the Senior Indebtedness and on the
Other Senior Obligations, (1) there are amounts available for payment on the
subordinated debt securities and (2) creditors in respect to the Other Senior
Obligations have not received their full payments, then we will first use
amounts available for payment on the subordinated debt securities to pay in full
all Other Senior Obligations before we may make any payment on the subordinated
debt securities.
By reason of the subordination provisions, in certain circumstances
relating to an insolvency event, the holders of subordinated debt securities may
recover less than the holders of Senior Indebtedness and the holders of Other
Senior Obligations. In addition, as a result of the differences among the
subordination provisions applicable to the Society Subordinated Indebtedness,
the Old KeyCorp Subordinated Indebtedness and the subordinated debt securities,
including differences in the definitions of senior indebtedness in the various
indentures, any distribution of assets upon the happening of an insolvency event
among the holders of Society Subordinated Indebtedness, Old KeyCorp Subordinated
Indebtedness and the subordinated debt securities may not be ratable.
OWNERSHIP OF VOTING STOCK OF SIGNIFICANT BANKS
The senior indenture contains a covenant by us that we will not sell or
otherwise dispose of, or grant a security interest in, or permit a Significant
Bank to issue, any shares of voting stock of the Significant Bank, unless we
will own free of any security interest at least 80% of the issued and
outstanding voting stock of the Significant Bank. The covenant will not apply
if:
- the proceeds of the sale or disposition are invested, within 90 days, in
any subsidiary (including any corporation which after such investment
becomes a subsidiary) engaged in a banking business or any business
legally permissible for bank holding companies. However, if the proceeds
are so invested in any subsidiary engaged in a business legally
permissible for bank holding companies
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other than a banking business, we may not sell or otherwise dispose of,
or grant a security interest in, or permit the subsidiary to issue, any
shares of voting stock of the subsidiary to the same extent as if such
subsidiary were a Significant Bank if, upon making the investment, the
assets of or held for the account of the subsidiary constitutes 10% or
more of our consolidated assets; or
- the disposition is made in exchange for the stock of any bank.
"Significant Bank" means any of our directly or indirectly owned banking
subsidiaries which assets constitute 10% or more of our consolidated assets
(currently, KeyBank National Association).
The subordinated indentures dated June 10, 1994 and January 1, 1985 (as
amended) do not contain a similar covenant, because inclusion of such a covenant
under the Interpretation would result in the subordinated debt securities not
qualifying as Tier II capital.
The subordinated indenture dated June 15, 1992 and amended by the First
Supplemental Indenture dated December 15, 1992 relating to the Society
Subordinated Indebtedness ("Society Subordinated Debt Indenture") contains a
provision substantially similar to the covenant described above.
EVENTS OF DEFAULT
Each indenture contains events of default with respect to the debt
securities issued under that particular indenture.
Senior Indenture. The term "event of default" in respect of the senior debt
securities means any of the following:
- We do not pay the principal of, or any premium on, a senior debt security
of the series on its due date.
- We do not pay interest on a senior debt security of the series within 30
days of its due date.
- We do not deposit any sinking fund payment in respect of a senior debt
security of the series on its due date.
- We remain in breach of a covenant in respect of debt securities of the
series for 60 days after we receive a written notice of default stating
we are in breach. The notice must be sent by either the trustee or
holders of at least 25% of the principal amount of the senior debt
securities of the series.
- We or any Significant Bank owned by us file for bankruptcy, certain
events of bankruptcy, insolvency or reorganization relating to us occur,
or a Significant Bank goes into receivership or conservatorship.
- We are required to accelerate the maturity of any indebtedness in an
aggregate principal amount exceeding $20 million, for money borrowed by
us or a Significant Bank, if the acceleration is not annulled within 10
days by a written notice. The notice must be sent by either the trustee
or holders of at least 25% of the principal amount of the senior debt
securities of the series.
The trustee may withhold notice to the holders of debt securities of any
default, except in the payment of principal or interest, if it considers the
withholding of notice to be in the best interests of the holders.
If an event of default, other than the filing for bankruptcy or the
happening of certain events of bankruptcy, insolvency or reorganization, has
occurred and has not been cured, the trustee or the holders of 25% in principal
amount of the senior debt securities of the affected series may declare the
entire principal amount (or, if the senior debt securities of that series are
original issue discount senior debt securities, a specified portion of the
principal amount) of all the senior debt securities of that series to be due and
immediately payable. This is called a declaration of acceleration of maturity.
Upon a filing for bankruptcy or the occurrence of certain events of
bankruptcy, insolvency or reorganization, the trustee or the holders of 25% in
principal amount of all the senior debt securities then outstanding may declare
the entire principal amount (or, if the senior debt securities of that series
are
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original issue discount senior debt securities, a specified portion of the
principal amount) of all the outstanding senior debt securities to be due and
immediately payable.
A declaration of acceleration of maturity may, under certain circumstances,
be canceled by the holders of at least a majority in principal amount of the
senior debt securities of the affected series.
Subordinated Indentures. The term "event of default" in respect of the
subordinated debt securities includes the following:
- Certain events occur relating to our bankruptcy, insolvency or
reorganization or the receivership of a Major Bank.
- Any other event of default specified with respect to the subordinated
debt securities of that series.
"Major Bank" means any of our directly or indirectly owned banking
subsidiaries which assets constitute 75% or more of our consolidated assets.
Currently, KeyBank National Association is a Major Bank.
If an event of default, other than the happening of certain events relating
to our bankruptcy, insolvency or reorganization or receivership of a Major Bank,
has occurred and has not been cured, the trustee or the holders of 25% in
principal amount of the debt securities of the affected series may declare the
entire principal amount (or, if the senior debt securities of that series are
original issue discount senior debt securities, a specified portion of the
principal amount) of all the subordinated debt securities of that series to be
due and immediately payable.
Upon the occurrence of certain events of bankruptcy, insolvency or
reorganization, or receivership of a Major Bank, the trustee or the holders of
25% in principal amount of all the subordinated debt securities then outstanding
may declare the entire principal amount (or, if the senior debt securities of
that series are original issue discount senior debt securities, a specified
portion of the principal amount) of all the outstanding subordinated debt
securities to be due and immediately payable.
A declaration of acceleration of maturity may, under certain circumstances,
be canceled by the holders of at least a majority in principal amount of the
subordinated debt securities of the affected series.
There is no right of acceleration of the payment of principal of the
subordinated debt securities upon a default in the payment of principal of,
premium, if any, or interest, if any, or a default in the performance of any
covenant or any agreement in the subordinated debt securities or subordinated
indentures.
In the event a "default" occurs and is continuing, the trustee may, in its
discretion and subject to certain conditions, seek to enforce its rights and the
rights of the holders of the subordinated debt securities by appropriate
judicial proceeding. "Default" means, with respect to any series of subordinated
debt securities, any of the following:
- An event of default.
- We do not pay the principal of, or any premium on, any subordinated debt
security at its maturity.
- We do not pay interest on any subordinated debt security on its due date
or for 30 days after its due date.
- We do not deposit any sinking fund payment in respect of any subordinated
debt securities on its due date.
- We remain in breach of a warranty or covenant in respect of any
subordinated debt securities (other than a warranty or covenant solely
for the benefit of a series other than that series) for 60 days after we
receive a written notice of default stating we are in breach. The notice
must be sent by either the trustee or holders of at least 25% of the
principal amount of the subordinated debt securities of that series.
Any other default occurs in respect of subordinated debt securities of the
series.
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The trustee may withhold notice to the holders of subordinated debt
securities of any default, except in the payment of principal, premium, if any,
or interest, if any, or in the payment of any sinking fund installment, if it
considers the withholding of notice to be in the best interests of the holders.
In addition, the trustee must withhold notice for certain defaults for a period
of 60 days.
In comparison to the events of default provided for in the KeyCorp
subordinated indenture and the subordinated indenture relating to the Old Key
Subordinated Indebtedness, the holders of Society Subordinated Indebtedness
issued under the Society Subordinated Debt Indenture have the benefit of an
additional default and related acceleration rights:
- Acceleration of our indebtedness for borrowed money in an amount
exceeding $5 million or the indebtedness in an amount exceeding $5
million of a Principal Bank.
"Principal Bank" under this indenture means Society National Bank, a
national banking association and whose successor is KeyBank National
Association.
Provisions Common to the Senior and Subordinated Indentures. Except in
cases of default where the trustee has some special duties, the trustee is not
required to take any action under the applicable indenture at the request of any
holders unless the holders offer the trustee reasonable protection from expenses
and liability (called an "indemnity"). If reasonable indemnity is provided, the
holders of a majority in principal amount of the outstanding senior debt
securities or subordinated debt securities of the relevant series may direct the
time, method and place of conducting any lawsuit or other formal legal action
seeking any remedy available to the trustee. The trustee may refuse to follow
those directions in certain circumstances. No delay or omission in exercising
any right or remedy will be treated as a waiver of that right, remedy or event
of default.
Before you are allowed to bypass your trustee and bring your own lawsuit or
other formal legal action or take other steps to enforce your rights or protect
your interests relating to the debt securities, the following must occur:
- You must give your trustee written notice that an event of default, in
the case of the senior debt securities, or an event of default or a
default, in the case of the subordinated debt securities, has occurred
and remains uncured.
- The holders of 25% in principal amount of all outstanding debt securities
of the relevant series must make a written request that the trustee take
action because of the event of default or default, as the case may be,
and must offer reasonable indemnity to the trustee against the cost and
other liabilities of taking that action.
- The trustee must not have taken action for 60 days after receipt of the
above notice and offer of indemnity.
- The holders of a majority in principal amount of the debt securities must
not have given the trustee a direction inconsistent with the above
notice.
However, you are entitled at any time to bring a lawsuit for the payment of
principal of, or premium, if any, or, subject to certain conditions, of
interest, if any, on the debt securities on or after the due date.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION TO OR MAKE A REQUEST OF THE
TRUSTEE AND HOW TO DECLARE OR CANCEL AN ACCELERATION.
Each year, we will furnish to each trustee a written statement of certain
of our officers certifying that to their knowledge we are in compliance with the
applicable indenture and the debt securities, or else specifying any default.
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MERGER OR CONSOLIDATION
Under the terms of the indentures, we are generally permitted to
consolidate or merge with another entity. We are also permitted to sell all or
substantially all of our assets to another entity. However, we may not take any
of these actions unless all the following conditions are met:
- We are the continuing corporation or our purchaser or successor is a
corporation organized under the laws of the United States of America, or
any of its States or the District of Columbia.
- We are the continuing corporation or our purchaser or successor must
agree to assume our obligations on the debt securities and under the
indentures.
- The merger or sale of assets must not cause, in the case of the senior
debt securities, an event of default or, in the case of the subordinated
debt securities, a default or an event of default, or cause an event,
which after notice or lapse of time, would become a event of default or a
default.
- If, as a result of a merger or sale of assets, shares of voting stock of
any Significant Bank become subject to a security interest not permitted
under the senior indenture, we, or our purchaser or successor, must take
all necessary steps to secure the senior debt securities equally and
ratably with, or prior to, the indebtedness secured by the security
interest.
- We must deliver certain certificates and documents to the trustee.
MODIFICATION OR WAIVER
Changes Requiring Approval. We and the trustee may modify each indenture
with the consent of not less than 66 2/3% in principal amount of each series of
outstanding debt securities affected by the modification. However, we may not,
without the consent of each affected holder:
- change the stated maturity of the principal of, or premium, if any, on a
debt security;
- change any installment of principal of or interest, if any, on a debt
security of that series;
- reduce any amounts due on a debt security;
- change any obligation to pay additional amounts in respect of a debt
security;
- reduce the amount of principal of an original issue discount security or
indexed security payable upon acceleration of the maturity of a security
or payable in bankruptcy;
- adversely affect any right of repayment at the holder's option;
- change the place or currency of payment on a debt security;
- impair your right to sue for payment;
- adversely affect any right to convert a debt security in accordance with
its terms;
- modify the subordination provisions in the subordinated indenture in a
manner that is adverse to holders of the subordinated securities;
- reduce the percentage in principal amount of holders of debt securities
needed to consent to modify or amend the applicable indenture;
- reduce the percentage in principal amount of holders of debt securities
needed to consent to waive compliance with certain provisions of the
applicable indenture or to waive certain defaults;
- reduce the requirements for voting or quorum relating to bearer
securities; and
- modify any of the provisions relating to supplemental indentures
requiring the consent of holders, relating to the waiver of past defaults
or relating to the waiver of certain covenants, except to increase the
percentage of holders whose consent is required for these actions or to
provide that
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certain provisions of the applicable indenture cannot be modified or
waived without the consent of each affected holder.
In addition, under the subordinated indentures, no modification may affect
the rights of any holder of Senior Indebtedness or Other Senior Obligations
without the consent of the affected holder of Senior Indebtedness or Other
Senior Obligations.
Changes Not Requiring Approval. Certain changes do not require any vote by
the holders of the debt securities. They are limited to clarifications and
certain other changes that would not adversely affect holders of the outstanding
debt securities in any material respect.
Waiver. The holders of at least 66 2/3% in principal amount of any series
of debt securities issued under an indenture may waive, on behalf of the holders
of that series, our compliance with certain restrictive provisions in that
indenture. Similarly, the holders of at least 66 2/3% in principal amount of any
series of debt securities issued under an indenture may waive, on behalf of the
holders of that series, any past default under that indenture, except a default
in the payment of principal, or premium, if any, or interest, if any, or in the
performance of certain covenants or provisions which can only be modified with
the consent of each affected holder. See "--Changes Requiring Approval."
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO CHANGE
THE APPLICABLE INDENTURE OR THE DEBT SECURITIES OR REQUEST A WAIVER.
DISCHARGE, COVENANT DEFEASANCE AND FULL DEFEASANCE
Discharge. Under terms satisfactory to the trustee, we may discharge
certain obligations to holders of any series of debt securities issued under the
indenture which have not already been delivered to the trustee for cancellation.
Such debt securities must also:
- have become due and payable;
- be due and payable by their terms within one year; or
- be scheduled for redemption within by their terms within one year.
Covenant Defeasance. Under current federal tax law, we can make the deposit
described below and be released from some of the restrictive covenants in the
indenture under which the particular series was issued. This is called "covenant
defeasance". In that event, you would lose the protection of those restrictive
covenants but would gain the protection of having money and government
securities set aside in trust to repay your debt securities. In order to achieve
covenant defeasance, we must do the following:
- We must deposit in trust for the benefit of all holders of the debt
securities of the particular series money and/or U.S. Government
Obligations that will generate enough cash to make interest, principal
and any other payments on the debt securities on their various due dates.
- We must deliver to the trustee a legal opinion of our counsel confirming
that, under current federal income tax law, we may make the above deposit
without causing you to be taxed on the debt securities any differently
than if we did not make the deposit and just repaid the debt securities
ourselves at maturity.
Full Defeasance. If there is a change in federal tax law, as described
below, we can legally release ourselves from all payment and other obligations
(subject to limited exceptions) on the debt securities of a particular series
(called "full defeasance") if we put in place the following other arrangements
for you to be repaid:
- We must deposit in trust for the benefit of all holders of the debt
securities of the particular series money and/or Government Obligations
that will generate enough cash to make interest, principal and any other
payments on the debt securities on their various due dates.
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- We must deliver to the trustee a legal opinion confirming that there has
been a change in current federal tax law or an IRS ruling that lets us
make the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit and just
repaid the debt securities ourselves at maturity. Under current federal
tax law, the deposit and our legal release from the debt securities would
be treated as though we paid you your share of the cash and notes or
bonds at the time the cash and notes or bonds were deposited in trust in
exchange for your debt securities and you would recognize gain or loss on
the debt securities at the time of the deposit.
If we accomplish covenant defeasance or full defeasance, you can still look
to us for payment of the debt security if the trustee or any paying agent is
prevented by order or judgment of any court or governmental authority from
making payment. However, if we make such payment to you, we will be subrogated
to the rights of the holders of the applicable debt securities to receive the
payment from the money held by the trustee or paying agent.
CONCERNING THE TRUSTEES
KeyCorp and its affiliates may from time to time engage in general
financing and banking transactions with any of the trustees or their respective
affiliates.
In the event we issue debt securities under an indenture with a trustee
that is also a trustee for any subordinate or superior class of debt securities
under another indenture, a default under either indenture could cause a conflict
of interest for the trustee under the Trust Indenture Act of 1939, as amended.
If such a default is not cured or waived within 90 days after the trustee has
acquired the conflict of interest, the trustee is required under the Trust
Indenture Act to either eliminate such conflict of interest or resign as trustee
with respect to the debt securities issued under one of the indentures. In the
event the trustee resigns, we will promptly appoint a successor trustee with
respect to the affected debt securities.
MARKET-MAKING ACTIVITIES
This prospectus may be used by broker-dealer affiliates of KeyCorp in
connection with offers and sales of the outstanding securities in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. Any broker-dealer affiliate of KeyCorp may act as principal or
agent in such transactions. No broker-dealer affiliate of KeyCorp has any
obligation to make a market in any of the outstanding securities and any
broker-dealer affiliate may discontinue its market-making activities at any time
without notice, at its sole discretion.
ERISA MATTERS
We have subsidiaries, including broker-dealer subsidiaries, that provide
services to many employee benefit plans. We and any of our direct or indirect
subsidiaries may each be considered a "party in interest" within the meaning of
the Employee Retirement Income Security Act of 1974, and "disqualified person"
under corresponding provisions of the Internal Revenue Code of 1986, relating to
many employee benefit plans. "Prohibited transactions" within the meaning of
ERISA and the Internal Revenue Code may result if any offered securities are
acquired by an employee benefit plan as to which we or any of our direct or
indirect subsidiaries are a party in interest, unless such offered securities
are acquired pursuant to an applicable exemption. Any employee benefit plan or
other entity to which such provisions of ERISA or the Internal Revenue Code
apply proposing to acquire the offered securities should consult with its legal
counsel.
LEGAL OPINIONS
The validity of the debt securities described in this prospectus will be
passed upon for us by Daniel R. Stolzer, Associate General Counsel of KeyCorp,
127 Public Square, Cleveland, Ohio 44114-1306. Mr. Stolzer beneficially owns, or
has rights to acquire under KeyCorp's employee benefit plans, an aggregate of
less than 1% of KeyCorp's common stock.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2000, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 2001 and March 31, 2000,
incorporated by reference in this prospectus, Ernst & Young LLP have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report,
included in KeyCorp's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001, and incorporated herein by reference, states that they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted considering the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at the
SEC's public reference room at 450 Fifth Street, NW, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our filings with the SEC are also available to the public
through the SEC's Internet site at http://www.sec.gov and through the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC. This
prospectus is a part of the registration statement and does not contain all of
the information in the registration statement. Wherever a reference is made in
this prospectus to a contract or other document, please be aware that the
reference is not necessarily complete and that you should refer to the exhibits
that are a part of the registration statement for a copy of the contract or
other document. You may review a copy of the registration statement at the SEC's
public reference room in Washington, D.C. as well as through the SEC's Internet
site.
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus.
Information that we file in the future with the SEC and incorporated by
reference in this prospectus will automatically update and replace the
information. KeyCorp incorporates by reference the documents listed below and
any future filings made by it with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, if the filings are
made before the time that all of the securities are sold in this offering:
- annual report on Form 10-K for the year ended December 31, 2000;
- quarterly report on Form 10-Q for the quarter ended March 31, 2001; and
- current reports on Form 8-K filed on January 17, February 14, and April
18, 2001.
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You may request a copy of these filings at no cost by writing or
telephoning us at the following address:
KeyCorp
127 Public Square
Cleveland, OH 44114-1306
Attention: Investor Relations
(216) 689-6300
You should rely only on the information incorporated by reference or
provided in this prospectus and the applicable prospectus supplement. We have
not authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
documents incorporated by reference are accurate as of any date other than the
date on the front of the applicable document.
Unless otherwise indicated, currency amounts in this prospectus are stated
in U.S. dollars ("$," "dollars," "U.S. dollars," or "U.S.$").
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KEYCORP
7% Series C Senior Notes due May 11, 2005 7.61% Subordinated Notes, Series IV, due September
Floating Rate Series D Senior Notes due December 10, 2001 9, 2002
Floating Rate Series D Senior Notes due May 30, 2002 7.63% Subordinated Notes, Series IV, due September
Floating Rate Series E Senior Notes due July 26, 2001 15, 2002
Floating Rate Series E Senior Notes due October 24, 2001 7.46% Subordinated Notes, Series IV, due September
Floating Rate Series E Senior Notes due October 30, 2001 25, 2002
Floating Rate Series E Senior Notes due November 21, 2001 7.53% Subordinated Notes, Series IV, due September
8.125% Subordinated Notes due June 15, 2002 30, 2002
7.3% Subordinated Notes, Series IV, due February 3,
2003
8% Subordinated Notes due July 1, 2004
6.75% Subordinated Series B Notes due March 15, 2006
7.5% Subordinated Series B Notes due June 15, 2006
The outstanding securities of KeyCorp listed above have been registered
under the Securities Act of 1933.
[KEYCORP LOGO]
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PROSPECTUS
DATED JUNE 27, 2001
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MCDONALD INVESTMENTS INC.
A KEYCORP COMPANY
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