Reports flag risk of banks getting stuck with buyout debt in 2026

In short: Big banks are supporting more buyout financing for 2026, and that raises the risk of a “hung deal” where they get stuck holding debt they expected to sell.

What's going on

Banks and their Wall Street partners are heading into 2026 in generally good shape. Recent outlooks point to steady profits, healthy cash buffers, and loan losses that are not spiking.

At the same time, banks are leaning back into deal making. One data point in the available reporting is that banks underwrote about $65 billion in debt for leveraged buyouts, or LBOs (a company purchase that uses a lot of borrowed money, like buying a house with a very large mortgage).

This kind of activity can create a specific risk called a “hung deal.” That is when banks promise to provide loans or bonds for a takeover, but then cannot complete the financing as planned. In plain terms, it is like agreeing to front the money for a purchase and then being unable to pass that loan on to someone else, so you are left holding it.

The catch is that the available results do not name a specific “high-profile” hung deal, a specific bank, or clear details about an attempt to revive a stalled transaction. They also do not show any clear connection to AI.

What to watch

If buyout activity stays busy, watch for signs that banks are having trouble selling this debt to investors, especially if interest rates move or markets get jittery. That is usually when “hung deals” become more likely and losses can show up.

Source: Financial Times