Sinking Feeling for Citi, JPMorgan

The banks have agreed to take on $10 billion of the $12 billion portion of the loans, while Cerberus and DaimlerChrysler(DCX Quote) will lend Chrysler $2 billion to complete the financing, according to the report, which cites sources familiar with the matter.

In Europe, Deutsche Bank (DB Quote) is the lead arranger of the loan deal to finance KKR's buyout of U.K.-based drugstore chain Alliance Boots. According to a Bloomberg report, it and other banks involved were unable to sell $10 billion of loans out of a total $12 billion to finance the buyout.

Shares of JPMorgan were recently down 1%, while the rest of the investment banking group was mixed. Goldman Sachs has bounced after closing below $200 Tuesday, and remains up 1.5%. Deustche Bank and Citigroup are down 1.2% and 0.7%, respectively.

"The panic has already happened" regarding the potential for these deals to fail, says Christian Stracke, senior strategist at CreditSights. He also notes that the banks have likely hedged much of their exposure to the loans in the derivatives markets.

Indeed, the risk premiums on the U.S. automakers in the credit derivatives market have risen dramatically. Stracke says the same is true for the derivatives connected to Boots, and to the overall derivatives index tied to the leveraged loan market, which continues to fall and make new lows.