TXU Corp, the Dallas-based power group, is braced for a crunch shareholder vote later today on a landmark $32 billion (£16 billion) buyout by Kohlberg Kravis Roberts and TPG Capital, two of the world's biggest private equity groups.

The vote, which needs the approval of two thirds of shareholders, represents the last major obstacle to the smooth completion of a deal.

Success for the two private equity groups would make TXU the second-largest leveraged buyout ever. If shareholders approve the sale, it should complete by the end of the year.

But although formal investor backing is expected, the banks involved in financing the buyout still face a potential headache if the turbulence in the credit markets continues over the coming months.

Leading investment banks, including Goldman Sachs, JP Morgan and Morgan Stanley, have agreed to provide $37.4 billion in financing. However, they run the risk of being stuck with securities on their books if investors remain risk-averse or demand improved terms in exchange for buying the paper.

KKR and TPG, formerly Texas Pacific, agreed to buy TXU for $69.25 a share.

The deal has received approval from the Federal Energy Regulatory Commission, as well as the support of Franklin Resources, the largest shareholder. However, it still needs clearance from the US Nuclear Regulatory Commission.

One investor, who opposes the buyout, told Reuters that the transaction will probably win shareholder support after the influential proxy advisory firm, Institutional Shareholder Services, lent its backing to the deal.

“We do not believe the price is an extremely high one; it’s a little bit undervalued,” said Bruce Allen, president of Bruce G Allen Investments, an investment adviser based in Denver.

“KKR would not be purchasing TXU if that were overvalued or fully valued. We think they are getting a very good deal,” he said.

KKR and TPG have already made big concessions, having sought the approval of US environmental groups who had opposed TXU’s plans to double its coal-fired generation.

As well as spiking its coal strategy, TXU was also persuaded by the buyout firms to cut its retail power rates across Texas. It has also backed out of an outsourcing agreement opposed by its unions.

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