Aug. 17 (Bloomberg) -- JPMorgan Chase & Co., the biggest lender in the leveraged buyout market, may lose about $1.4 billion on loans it can't sell because of the credit crunch, according to an analyst at Citigroup Inc.

Goldman Sachs Group Inc., Deutsche Bank AG and other underwriters of loans to finance leverage buyouts face similar shortfalls, based on the formula that Citigroup analyst Keith Horowitz in New York used to calculate JPMorgan's loss.

JPMorgan is stuck with $40.8 billion of LBO debt, according to Horowitz's estimates, while Goldman is holding $31.9 billion and Deutsche Bank has $27.3 billion. JPMorgan and Goldman were among banks that last month failed to sell $20 billion of loans for the LBOS of U.K. drugstore chain Alliance Boots Plc and carmaker Chrysler LLC.

``The backlog of unsold deals is going to take banks the rest of the year to clear, if not longer,'' said Robin Doumar, who oversees $3 billion of loan funds as managing partner at Park Square Capital LLP in London.

To calculate the mark-to-market losses, Citigroup assumed a 7 percent decline in the price of the high-yield, or leveraged, loans. The bank then assumed half of the loss was offset by hedge gains, underwriting fees and interest from the loans.

The estimates are ``conservative,'' Citigroup said, and assume an equal share to all arrangers in a loan, even though banks leading a deal typically agree to underwrite more than other managers. The estimates also assume prices of the debt remain the same or aren't resold at discounted prices.

Citigroup didn't include Barclays Capital, Royal Bank of Scotland Group Plc or itself in its calculations.

Arrangers of loans seek to reduce the amount they lend by syndicating the credit to a wider group of banks and money managers. The lenders must keep the debt they can't sell.

Citigroup spokesman Duncan Smith said the bank hasn't changed its estimates since the July 26 report, while Horowitz yesterday declined to elaborate on its conclusions.

JPMorgan spokesman Michael Golden in London declined to comment. Goldman Sachs' London-based spokesman Erlendas Grigorovic declined to comment. Deutsche Bank spokeswoman Oonagh Baerveldt in London couldn't immediately comment.

Citigroup's estimates of LBO loans

JPMorgan (JPM)           $40.76 billion
Goldman Sachs (GS)       $31.88 billion
Deutsche Bank (DB)       $27.27 billion
Credit Suisse (CS)       $27.16 billion
Lehman (LEH)             $21.73 billion
Morgan Stanley (MS)      $20.08 billion
Bank America (BAC)       $17.84 billion
Merrill Lynch (MER)      $16.12 billion

Source: Citigroup, Loan Pricing Corp.

Company             Total Debt          Arrangers
Alliance Boots      $13.5 billion       DB, UniCredit, JPM
Alliance Data       $6.61 billion       CS
Alltel              $23.2 billion       Barclays, Citi, GS, RBS
Avaya               $6.05 billion       Citi, JPM, MS
Bausch & Lomb       $3.28 billion       BAC, Citi, CS, JPM
BCE                 $33.35 billion      Citi, GS, JPM, LEH, MS
Biomet              $6.87 billion       BAC, BS, GS, LEH, MER, WB
Cablevision         $21.16 billion      DB, JPM
CDW Corp            $4.88 billion       DB, JPM, LEH, MS
Ceridian            $2.3 billion        CS, DB
Chrysler            $20 billion         BSC, Citi, GS, JPM, MS
Clear Channel       $21.48 billion      Citi, CS, DB, MS, RBS, WB
Dollar General      $5.4 billion        Citi, CIT, GS, LEH, WB
First Data          $24 billion         Citi, CS, DB, GS, HSBC,
                                        LEH, MER
Harman              $8 billion          BAC, CS, GS, LEH
Harrahs             $20.28 billion      BAC, Citi, CS, DB, JPM,
                                        MER
Sallie Mae          $16.5 billion       BAC, JPM
Service Master      $4.5 billion        BAC, Blue Ridge, Citi,
                                        GS, JPM, MS
Station Casinos     $3.23 billion       DB, German American
Thomson             $4.94 billion       Citi, JPM, RBS and UBS
TXU                 $37.15 billion      Citi, CS, GS, JPM, LEH,
                                        MS
US Foodservice      $4.92 billion       Citi, DB, GS, JPM, MS,
                                        RBS
Total: $291.6 billion

Source: Citigroup, Loan Pricing Corp.

To contact the reporter on this story: Cecile Gutscher in London at cgutscher@bloomberg.net.

Last Updated: August 17, 2007 08:37 EDT