Talks between Greece and private bondholders on a debt swap scheme made some progress but ended without agreement on Tuesday as the two sides haggled over the coupon rate and sweeteners to seal a deal, bankers involved in the discussions said.

The bond swap, dubbed private sector involvement (PSI+), is a key part of the debt-choked country’s 130 billion euro bailout and Athens is keen to clinch a deal by the end of January to secure crucial budget relief before elections due on February 19.

“Greece got a proposal (from private creditors) and will study it,” a banker involved in the talks told Reuters, without offering further detail. “It was not rejected but the deal cannot be finalized today.”

Trying to bridge the gulf between their proposals, the two sides found some common ground, with private creditors willing to come closer to the government’s stance provided the new bonds they get match the credit status of official loans.

“Banks moved towards the sovereign’s proposal on the condition that the new bonds have about the same credit status as official sector loans,” a second banker involved in the talks told Reuters.

“But there are many details that remain to be resolved.”

At a summit on October 27, euro zone leaders reached a deal with private banks and insurers to accept a 50 percent loss on the notional value of outstanding Greek bonds they hold in exchange for new instruments.

The writedown is designed to help to cut Greece’s debt ratio to 120 percent of GDP by 2020 from 160 percent this year. It will also save the state 5.1 billion euros in interest payments next year.

But negotiations on the voluntary restructuring of 206 billion euros of outstanding Greek government paper in private sector hands face sticking points.

They include the coupon rate on the bonds and the assumed discount rate, which determine the loss banks will incur in terms of net present value (NPV). NPV is a measure of the current worth of the bonds’ future cash flows.

A successfully concluded debt swap is key to meeting Greece’s target to cut its budget gap to 5.4 percent of GDP next year from an expected 9 percent this year and attain a primary surplus.

Failure to reach an agreement on a voluntary writedown of the bonds would have huge ramifications for Greece and the insurance policies written on its debt, known as credit default swaps.

Sources have previously told Reuters Greece is offering bondholders 15 euros in cash and new bonds with a face value of 35 euros, paying a coupon of around 4.5 percent for every 100 euros of outstanding bonds.

But private creditors want the new bonds to pay a higher coupon of 8 percent with principal backed by AAA-rated assets.

Athens is being advised by law firm Cleary Gottlieb Steen & Hamilton on implementing the debt swap, with Lazard Freres acting as its financial adviser.

George Georgiopoulos | Reuters