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[$$] Wall Street to Tamp Down on Default Insurance Bets

WASHINGTON—The standard-setters for the derivatives industry plan to limit the use of a product sold to insure against corporate defaults, following disputes over whether some companies engineered a default to trigger payouts to investors. The proposal by the International Swaps and Derivatives Association is intended to block moves similar to one made between Blackstone Group and Hovnanian Enterprises Inc. Last year, Hovnanian moved to default on its debts to produce a payout to Blackstone’s GSO Capital Partners LP. Hovnanian was healthy enough to meet its payment obligations, prompting a campaign by regulators to get the parties to back down from the arrangement before it was completed.