Sporting Gijon are only prepared to do business with Birmingham over Michel for 4million euros, according to reports in Spain.
Blues manager Alex McLeish spent much of the summer chasing the Spaniard but a move failed to materialise due to a disagreement over the transfer fee.
Birmingham's final offer was understood to be in the region of 3million euros, to be paid in several instalments.
Gijon rejected the bid but reports in the Spanish media suggest they would now accept a proposal of 4million euros if they receive at least 60 per cent of that sum in January.
Coach Manuel Preciado still regards Michel as a key player but the club's financial situation could force them to let him go.
And McLeish is expected to be provided with considerable transfer funds in the New Year after Carson Yeung completed his takeover at St Andrews.
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