Robert Polenberg, director of S&P Leveraged Commentary & Data, says the banks that underwrote the deals are still on the hook for $234 billion in loans. Since the banks either have to sell that debt at a deep discount or keep it-and its risks-on their books, this is holding up completed deals and backing up others about to be signed.

The deal flow isn't just slow, it's essentially stopped. Polenberg said there were only two deals in the first half of August.

Tishman Speyer Properties and Lehman Brothers Holdings delayed their $15.2 billion acquisition of Archstone-Smith Trust, saying that debt market conditions had made it too difficult to sell the $17 billion in debt needed to complete the deal.

Cerberus Capital ran into the same problem. To finalize its takeover of Chrysler, Cerberus and the seller, Daimler, had to shoulder $2 billion of the $12 billion loan that was slated to be sold to others. Again the reason was "highly volatile U.S. loan markets," according to DaimlerChrysler.

Of course there is a silver lining for some players. Many hedge funds and private equity firms are now trolling the credit markets, picking up debt on the cheap.

And in a perverse turn of events, the crisis has given some companies a new handle on their foes. TXU, a Texas utility, has been using the debt crisis to rally support for its private equity suitors, telling recalcitrant shareholders that bids are unlikely to get better given current market conditions.

Others have been given breathing room to accept offers when activist shareholders themselves switched course and decided to support the company's plans.

On Tuesday, Pershing Square Capital Management finally gave its blessing to a buyout of Ceridian, which processes payrolls, after fighting tooth and nail against it. Pershing grew concerned that deteriorating credit markets would make any higher offer unlikely and would jeopardize the offer on the table.