The credit panic sweeping international markets claimed its latest victim yesterday as Cadbury Schweppes was forced to delay the £7 billion-plus sale of its US drinks arm amid steep falls in global equity markets.

Yesterday markets on both sides of the Atlantic endured a further battering. Wall Street ended 208.10 points lower at 13,265.50, making for a decline of more than 4 per cent this week, despite better than expected news on the American economy’s performance in the second quarter. In London, the FTSE 100 index of blue-chip shares ended down 36 points, or 0.6 per cent, at 6,215.2, its lowest close since mid-March.

Cadbury, the maker of Dr Pepper and Snapple drinks blamed the delay on “extreme volatility” in the leveraged debt market in recent days as it extended the timetable for the deal.

The postponement was the latest manifestation of the crisis spreading across global markets as investors flee high-risk leveraged buyouts in the wake of the collapse of the sub-prime mortgage market in America. Those fears had been contained to the debt market, but this week they spilled over into stock markets, as investors bet the era of easy lending that has fuelled a boom in takeovers, and pushed shares to record highs, was over.

Henry Paulson, the US Treasury Secretary, said that the market volatility was a “wake-up call” for people who had not adequately assessed the risks they were taking.

Meanwhile, Citigroup estimated that Fannie Mae and Freddie Mac, two of America’s biggest lenders, have suffered about $4.7 billion of unrealised losses as a result of the sub-prime mortgage meltdown.

Cadbury’s bad news added to the gloom earlier in the week as banks that had underwritten billions of dollars worth of debt for buyouts were forced to sit on the loans after failing to syndicate them in the market.

Banks led by JPMorgan abandoned plans to syndicate $12 billion (£6 billion) of loans to Cerberus to back its leveraged acquisition of Chrysler. JPMorgan, Deutsche and UniCredit have been stuck with more than €7 billion (£4.7 billion) of debt backing for KKR's financing of its takeover of Alliance Boots after nervous investors refused to back the deal.

Hilton Hotels, the subject of a recommended $26 billion bid from Blackstone, admitted yesterday that the volatility had cost its shareholders more than $200 million after the private equity group could not raise enough debt to increase its offer. There were also fears that KKR’s stock market listing could be delayed because of the knock-on effect of the credit crunch.

An estimated $250 billion of underwritten loans in America and loans of up to €30 billion in Europe are waiting to be syndicated.

David Brickman, a senior credit strategist for Lehman Brothers in London, said: "Investors are no longer prepared to buy increased credit risk at all. The reality is the bulk of this inventory will overhang until at least September.”

The FTSE’s latest losses meant the London market has borne much of the past week’s sell-off, with 5.6 per cent of its value erased. US markets yesterday appeared to shrug off positive news on the US economy. American GDP growth rebounded in the second quarter, to an annualised rate of 3.4 per cent, sharply up from the 0.6 per cent pace registered in the first quarter. The improvement was driven by a surge in business investment and more government spending, notably on the military, and a jump in exports boosted America’s trade performance.

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