Kohlberg Kravis Roberts, the American private equity firm hit hardest by the credit markets chaos, has postponed its $1.25 billion (£627 million) initial public offering after wary investors showed no appetite for the stock.

KKR was expected to list on the New York Stock Exchange next month. However, The Times understands that the buyout firm has decided to put the float on hold in the wake of investor jitters over the collapse of the sub-prime mortgage market in America.

Last night KKR denied, however, that the IPO had been put on ice. "As evidenced by the recent filing of an amendment to the registration statement, we are continuing to work on the IPO and have not postponed," a spokesman said.

In recent weeks concerns over sub-prime mortgages – risky home loans to low-income borrowers – have spread rapidly across debt and equity markets. Banks have closed their doors for new financing, forcing central banks to pump billions of dollars into money markets to stave off a full-blown financial crisis.

Nervous investors have reacted by shunning risk, fleeing stock markets and seeking safe-haven investments such as government bonds. Currency markets have also been rocked by the widespread panic.

Carlyle, another big American private equity firm, said yesterday that it had no plans to float this year because of market turbulence. Carlyle was also forced to put up $100 million to meet margin calls on one of its funds, which focuses on European mortgage investments with $22.7 billion in assets.

Postponing its initial public offering (IPO) is the latest blow for KKR, which has already been hit hard by the turmoil. Last week it disclosed that it may have to record steep losses in its KKR Financial Holdings subsidiary, a US-listed affiliate that was set up to invest in corporate and other debt.

Further, several of its huge buyouts, including the $45 billion acquisition of TXU, the Texan utility, and its £11 billion buyout of Alliance Boots, the British retailer, have got stuck in syndication as investors refused to buy the bank debt used to fund the deal.

It is not clear when KKR will try to go ahead with its IPO. One person close to the situation said that it had not been abandoned altogether and that KKR would revisit it when the markets had calmed down.

KKR announced plans to float last month and hired Morgan Stanley and Citigroup to underwrite the IPO. Many on Wall Street had predicted that the private equity firm would be unable to push ahead with its plans, given the market conditions and after the poor performance of the $4.7 billion IPO of the rival Blackstone.

Since its flotation at $31 a share, Blackstone’s stock has lost about 18 per cent of its value as investors have grown nervous about the private equity sector in general and high-risk leveraged buyouts. The stock was trading yesterday at about $25.

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