JPMorgan is losing special situations partner Jonathan Katz, who is setting out to open his own hedge fund shop next year.

Katz will take his distressed bank and high-yield debt trading experience from the Special Situations Investing Fund to the as-yet-unnamed distressed debt hedge fund. Reuters reports he is seeking about $250 million for an early 2008 launch.

Katz told the news agency he expects a large number of opportunities in his chosen sectors in the coming months.

“In a down market environment, we would expect a third to a half of this highly-leveraged paper will have to be restructured,” he said.