Can anyone explain this: "The market for credit derivatives is now so large, in many instances the amount of credit derivatives outstanding for an individual na

Can anyone explain this: "The market for credit derivatives is now so large, in many instances the amount of credit derivatives outstanding for an individual name are vastly greater than the bonds outstanding. For instance, company X may have $1 billion of outstanding debt and $10 billion of CDS contracts outstanding. If such a company were to default, and recovery is 40 cents on the dollar, then the loss to investors holding the bonds would be $600 million. However the loss to credit default swap sellers would be $6 billion." My understanding was, if you have $1 billion in outstanding debt, and that defaults, then the people providing the credit default swap would have to pony up $1 billion. So who are they giving the other $5 Billion to?