In the past few weeks the global credit market has essentially ground to a halt.

Dozens of big deals on both sides of the Atlantic have had to postpone or cancel the syndication of billions of dollars worth of debt.

The problems have been caused by the collapse of the US sub-prime mortgage market. As a result, investors have the jitters and are refusing to buy the loans outright or demanding better terms.

The problems are so severe that bankers are asking if this is the beginning of the end or the end of the beginning?

What’s clear is that private equity deals which have yet to be underwritten won’t get done. This will lead to a fall in deal volumes - certainly in the short term.

But just how long the problems will last is unclear. Most bankers hope what we are seeing is just a repricing of loans, not an actual downturn in the credit cycle. That is because the fundamentals are still positive. Corporates are awash with cash, earnings are strong and interest rates, while rising, are still at historic lows.

The optimists believe things will gradually settle down and deal flow will go back to normal, albeit at higher prices.

In the meantime, banks such as Citigroup, Deutsche Bank, JPMorgan - the biggest lenders to private equity – have shut up shop, refusing to underwrite any new deals until the backlog is cleared.

Witness EMI, where Citigroup is threatening to pull the plug on Terra Firma’s £2.4 billion acquisition of the British music group unless the private equity firm can get 90 per cent of shareholders to back the deal by Sunday.

Last month, Chuck Prince, chief executive of Citigroup, said that while the music was playing, his bank would keep dancing. For now, it seems, everyone’s standing still.

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