Private equity firms want banks to give them more breathing space to sort out their struggling portfolio companies instead of increasing pressure, which has already led to the loss of investments, an industry spokesman told Dow Jones Newswires on Monday.

The British Private Equity and Venture Capital Association has already approached Barclays PLC (BCS), Lloyds Banking Group (LYG), Royal Bank of Scotland Group PLC (RBS) and HSBC Holdings PLC (HBC) with a view to reaching an agreement on an acceptable code of conduct between lenders and businesses during restructurings.

"Our members feel that the aggressive behavior by some banks is damaging their portfolio companies in the short term rather than helping them," spokesman Nathan Williams said.

Owners report that banks are demanding substantial loan repayments when profit-related covenants are breached on companies bought during the buyout boom a few years ago and in situations where banks had previously been more flexible or even overlooked breaches.

The development is just the latest twist in a tussle for the upper hand between buyout owners and the lenders who stumped up large loans for to finance acquisitions.

Banks have stepped up pressure because they are no longer prepared to take large write-offs, or losses, on these loans. Several recent debt restructurings have even seen private equity firms lose their portfolio companies after lenders seized control via debt for equity swaps.

Last month, buyout firm PAI Partners lost control of roofing company Monier Group after the company's senior lenders completed a debt for equity swap. And in April Candover and Permira lost out in the restructuring of Italian luxury yacht maker Ferretti, after lenders took control.

Other restructurings have been jeopordized following delays due to difficulties in negotiations between lenders, companies and sponsors. An example is the debt restructuring of IMO Car Wash, owned by U.S. private-equity firm Carlyle Group, which ended up in the High Court in London after senior and junior lenders failedto reach agreement despite months of negotiations.

The BVCA was at pains to stress that its aim was to produce a consensual mutually beneficial agreement rather than to be adversarial. It said it hoped to have some idea by the end of October whether a voluntary code listing acceptable behaviour was feasible.

BVCA represents more than 450 firms actively involved in the U.K. private equity industry, according to its Web site.

Representatives for Lloyds, RBS, HSBC and Barclays weren't immediately available for comment.

   --By Marietta Cauchi and Ainsley Thomson,  Dow Jones Newswires;  +44 207 842 9241; marietta.cauchi@dowjones.com