Representatives of out-of-favour midfielder Michel are having talks with Birmingham over his future.
The 25-year-old Spaniard could be on his way out of the Midlands club having failed to make an impact, taking a backseat to fellow midfielder Barry Ferguson in Alex McLeish's line-up.
Manager McLeish admits he has struggled to find room for Michel, who signed at St Andrews from Sporting Gijon 12 months ago, in his current plans.
"I am sorry the Michel one has not worked out," said McLeish.
"But Barry Ferguson's form has been stunning and made it difficult for Michel.
"Who knows, it could have been different if he had got the nod ahead of Barry and played regular football.
"I've been involved in a few transfer dealings over the past couple of years and I'm disappointed one hasn't worked out."
AEK Athens were thought to be chasing Michel's signature, but the Greek outfit have since cooled their interest.