At yesterday's closing, Brazil and its banks exchanged old loans for new bonds backed by guarantees on payment of principal and interest.

Under the agreement, each creditor bank can either exchange old loans at a 35 percent discount to face value for 30-year floating-rate bonds or exchange them at par for 30-year bonds with a fixed rate of 6.25 percent.

Moreover, Japanese and German banks are balking at a refinancing proposal put forward by J. P. Morgan & Company that would involve exchanging short-term South Korean loans for longer-term bonds.

When friends parted, they exchanged loans of money to be returned in the next life.

American commercial bankers said prospects had dimmed that South Korea would accept a plan devised by J. P. Morgan & Company to exchange private-sector loans for longer-term debt guaranteed by the Government.

Less popular (9%) was an option to exchange existing loans at a discount of 30% for paper paying interest at the LIBOR interbank rate plus almost 1%.

He added that Citibank was more eager than Mexican officials to exchange loans for equity in Mexican businesses.

By exchanging existing loans for bonds of lesser face value, the banks would have to take a loss on the difference as a write-off of a bad loan.

There are three different ways in which currency swaps can exchange loans:

So far, general proposals for exchanging old loans for new kinds of debt are circulating among bankers, but no negotiations have started to hammer out the details.