The Foxes had agreed a loan deal with Birmingham for Hughes, but the Football League refused to allow the deal to go through because the First Division promotion hopefuls are currently in administration.
Walkers Stadium boss Micky Adams was perplexed as to why the club had not been allowed to sign Hughes.
"I naturally assumed that, as we could loan players out as we have been doing, that we could take them in on the same basis," Adams told the club's official website.
"I had worked out loans for three of our fringe players and the saving of wages would have covered the new man coming in from the financial point of view.
"But apparently it can't be done until we come out of administration, which I find hard to understand because we had loaned Jon Ashton to Notts County when they were in administration earlier in the season.
"At least while the new arrivals are delayed it should show the players here that I mean business, that I am going to make changes and strengthen the squad and some will have to raise their standard if they want to remain part of it."
