GAM, one of the largest fund of hedge funds managers, and rival Thames River Capital are primed to make substantial investments in the stalled bank loan market, buying debt at a discount from lenders anxious to remove it from their balance sheets.

The chance to buy loans on the cheap has arisen because banks are struggling to sell debt used to finance leveraged buyouts. Before June banks had been able to sell leveraged loans within a few weeks, but liquidity in the credit markets has dried up as a result of uncertainty over lenders' exposures to sub-prime US mortgage loans.