Private equity firms are called that because they own stakes in the companies they buy. Today, this assumption is looking ever more outdated.

Slowly but surely, investment bankers from New York to London are chipping away at the tens of billions of dollars in leveraged buyout debt that remains famously stuck on their balance sheets.

One of the most lucrative money-making machines in the world of finance is all clogged up, threatening a year of pain for Wall Street banks and private-equity barons as a decade-long deal boom goes bust.

Investment bankers in the US and Europe are bracing for potentially billions of dollars in total losses on big-ticket leveraged buyouts as they struggle to offload risky corporate debt that’s plunging in value amid a sweeping market selloff.

Banks are gearing up to offload billions of dollars in junk debt backing leveraged buyouts, counting on the nascent stability in the market to finally get rid of underwrites for businesses such as Wm Morrison Supermarkets Plc and Unilever Plc’s tea unit.

Buyout activity is picking up pace in Europe, but a number of banks are taking a cautious approach to new risk, looking for higher pricing, more flex protection and in some instances fuller fees on junk-rated debt underwrites against a backdrop of heightened volatility, inflation and rising rates.