Takeovers might not take

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NEW YORK - The old adage on Wall Street is that corporate takeovers come roaring back from the sluggish summer months right after Labor Day. This time, that might not hold up.



The massive leveraged buyouts that helped drive stocks higher this year appear to have evaporated as corporate credit tightens. That likely will stymie any quick resumption of deal making.

The cheap credit that fed the buyout boom has dried up - and that jeopardizes major deals still waiting for financing. Banks are said to be having a hard time finding investors to back loans for a number of private equity deals.

The closed credit market began as major banks have become nervous about massive loans on their books. And there is increasing pressure on private equity firms to renegotiate deals to lessen the amount of money borrowed.

Banks, which signed agreements to back private equity deals with virtually no financing outs, are under pressure.

"If there's no buyers for the assets that you are to distribute, then you take a hit. You've basically got to mark down the assets," said Nick Hill, the director in the financial institutions group at Standard & Poor's.

This is expected to cut into earnings for the nation's corporate lenders. Standard & Poor's estimates major U.S. banks could see debt underwriting cut in half compared to the first half of the year.

Revenue from debt underwriting in the first half of 2007 came to $1.69 billion for JPMorgan, $1.52 billion for Citigroup, and $1.11 billion for Bank of America Corp.

Major banks are expecting to operate in a fairly tight environment, especially with some big loan obligations on tap. So far this year, they've helped fund about $465.5 billion worth of private equity transactions and are on the hook to finance 285 more deals worth $535.6 billion, according to data provider Dealogic.

There are about 3,567 deals including private equity and corporate takeovers pending globally, worth $1.7 trillion. The first big test for credit markets will come later this month when the banks will focus on trying to get some big debt offerings completed.

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