Reeling from an unfavorable court decision on its tax strategy, banking giant KeyCorp said it would take an after-tax accounting charge of between $1.1 billion and $1.2 billion in the second quarter, cut its dividend in half and raise another $1.5 billion by issuing shares.
The court rejected a leveraged-lease, or sale in/lease out, tax strategy that Key had used in a case involving AWG Leasing Trust (see IRS Prevails in German Tax Shelter Case). The strategy involved Key and PNC Bank setting up a partnership in which they paid $423 million in December 1999 to buy a waste-to-energy facility in Wuppertal, Germany, which they then leased back to the original owner.
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