Dizzying New Ways To Dice Up Debt

Suddenly, credit derivatives--deals that spread credit risk--are surging

In June, an international bank client of J.P. Morgan & Co. called the august Wall Street firm with a not-uncommon problem. It had a basket of some 20 loans totaling more than $500 million to mostly investment-grade companies but wanted to lend more money to the same borrowers. And it wanted to reduce its capital requirements and protect itself against borrower defaults. In the past, Morgan's client would have had to sell all or part of the loans.

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