Some of the world's biggest debt investors are demanding betterterms to lend money for corporate takeovers after $42 billion offailed deals left them nursing losses.

The money managers are pressing Wall Street banks to shield themfrom losses that occur when a failed merger prompts a company tobuy back debt at a price below market value, according to peoplewith knowledge of the matter. The discussions heated upafter the failure last month of Lam ResearchCorp.'s $10.6 billion deal to purchase KLA-Tencor Corp., whichcost bondholders $86 million, the people said, asking not to beidentified as the discussions are private.

Investors who have enabled $1.2 trillion of mergers this yearare nervously staring down a growing pipeline of debt that needs tobe sold for deals that may never see the light of day. Among themare AT&T Inc.'s $85 billion merger with Time Warner Inc. andBayer AG's acquisition of Monsanto Co. Those companies have alreadylined up a combined $97 billion in bridge loans from banks, whichtypically offload the debt to investors in the bond market before atransaction is completed.