14. Trust Preferred Securities Issued by Unconsolidated Subsidiaries

We own the outstanding common stock of business trusts formed by us that issued corporation-obligated mandatorily redeemable trust preferred securities. The trusts used the proceeds from the issuance of their trust preferred securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the mandatorily redeemable trust preferred securities.

We unconditionally guarantee the following payments or distributions on behalf of the trusts:

•

required distributions on the trust preferred securities;

•

the redemption price when a capital security is redeemed; and

•

the amounts due if a trust is liquidated or terminated.

The Regulatory Capital Rules, discussed in the “Supervision and regulation” portion of this report, implement a phase-out of trust preferred securities as Tier 1 capital, consistent with the requirements of the Dodd-Frank Act. For standardized approach banks such as Key, the phase-out period begins on January 1, 2015, and by 2016 will require us to treat our mandatorily redeemable trust preferred securities as Tier 2 capital.

As of September 30, 2013, the trust preferred securities issued by the KeyCorp capital trusts represent $340 million, or 3.4% of our total qualifying Tier 1 capital, net of goodwill.

The trust preferred securities, common stock and related debentures are summarized as follows:


					Principal		Interest Rate			Maturity
	Trust Preferred				Amount of		of Trust Preferred			of Trust Preferred
	Securities,		Common		Debentures,		Securities and			Securities and
dollars in millions	Net of Discount ^(a)		Stock		Net of Discount ^(b)		Debentures^(c)			Debentures
September 30, 2013
KeyCorp Capital I	$	156	$	6	$	162		1.014	%		2028
KeyCorp Capital II		102		4		106		6.875			2029
KeyCorp Capital III		133		4		137		7.750			2029

Total	$	391	$	14	$	405		4.834	%		—

December 31, 2012	$	417	$	14	$	431		5.025	%		—

September 30, 2012	$	423	$	14	$	437		5.095	%		—

(a)

The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $51 million at September 30, 2013, $77 million at December 31, 2012, and $83 million at September 30, 2012. See Note 7 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b)

We have the right to redeem these debentures. If the debentures purchased by KeyCorp Capital I are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (a) the principal amount, plus any accrued but unpaid interest, or (b) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points (25 basis points or 50 basis points in the case of redemption upon either a tax event or a capital treatment event for KeyCorp Capital III), plus any accrued but unpaid interest. When debentures are redeemed in response to tax or capital treatment events, the redemption price for KeyCorp Capital II and KeyCorp Capital III generally is slightly more favorable to us. The principal amount of certain debentures includes basis adjustments related to fair value hedges totaling $51 million at September 30, 2013, $77 million at December 31, 2012, and $83 million at September 30, 2012. See Note 7 for an explanation of fair value hedges. The principal amount of debentures, net of discounts, is included in Long-Term Debt on the balance sheet.

(c)	The interest rates for the trust preferred securities issued by KeyCorp Capital II and KeyCorp Capital III are fixed. KeyCorp Capital I has a floating interest rate equal to three-month LIBOR plus 74 basis points that reprices quarterly. The total interest rates are weighted-average rates.