Jon Moulton, the UK private equity veteran, has cast a shadow over his industry’s hottest new investment area by warning of “legal and ethical problems” when buy-out groups acquire debt in companies where they also own the equity.

When credit markets imploded a year ago it left banks holding more than $200bn of “hung” leveraged loans, which they underwrote on generous terms during the debt boom but have struggled to sell since the credit crunch.