Leveraged finance pay leveraged up

The leveraged finance sector has gone from hot to scorching. How long will it last?

"There is definitely a bubble building and anyone in leveraged finance who tells you otherwise is lying," says Lee Thacker, a partner at search firm Heidrick & Struggles.

Earlier this week the Financial Services Authority (FSA) warned that the increasingly high levels of debt associated with private equity funds make a massive default inevitable.

Banks appear unphased by the ominous predictions, however.

Demand for leveraged financiers is "incredible, insatiable," says Tim Smith, head of banking at recuiter Walker Hamill.

One measure of insatiability is the fact that banks are still avidly hiring weeks before bonuses are paid - Goldman Sachs has just added seven to its global leveraged finance and bond business; two weeks ago BNP Paribas added nine.

Another is that guaranteed bonuses are widespread, and increasingly extend to two years. Senior associates in leveraged finance can now command packages worth US$500k (262k) to US$550k, estimates Thacker.

How long can this go on? Your guess is as good as ours. Share your views below.

· Is the leveraged finance market about to leverage itself over the edge of a cliff? Add your comment and let us know what you think.