The deal could help pave the way for prospective loan deals by other issuers, and tests a pick-up in market sentiment. Nord Anglia Education did not respond to requests seeking comment.

The funding is meant to refinance existing debt falling due next year and comes in the form of two term loans worth 1.5 billion euros and $610 million, maturing in 2028, the term sheet showed.

The underwriting banks - led by Deutsche Bank, HSBC and JPMorgan - sold the loans to investors at 98 cents on the dollar, up from the much steeper discounts seen in deals last year.

The euro loan pays 475 basis points (bps) over the benchmark euro area money market rate, while the dollar loan pays 450 bps above the benchmark U.S. money market rate.

A source close to the matter said Nord Anglia had previously paid 325 bps over the benchmark, which is subject to interest rates hikes by central banks.

Demand for riskier assets such as leveraged loans weakened last year in the face of geopolitical and macro headwinds, but with sentiment improving, firms are once again trying to entice investors in with attractive terms.

The Nord Anglia Education syndication kicked off in the second week of January, making it the first major European leveraged loan transaction of 2023.

The deal tests market sentiment due to its sheer size, but the specifics of the credit make it hard to extrapolate conclusions for future deals.

Despite growing momentum in leveraged loan activity, riskier issuers are expected to continue to struggle to sell new debt for the time being.

Nord Anglia Education runs dozens of schools around the world, which in the year to August 2021 generated more than $1 billion in net revenue and an operating profit of $179 million, as per its latest UK accounts.

The business was taken off the stock market in 2017 by Canada Pension Plan Investment Board and Baring Private Equity Asia, now part of buyout group EQT.

($1 = 0.9168 euros)

(Reporting by Pablo Mayo Cerqueiro and Chiara Elisei; Editing by Dhara Ranasinghe, David Goodman and Jan Harvey)

By Pablo Mayo Cerqueiro and Chiara Elisei