Liverpool face the prospect of missing out on their second major transfer target of the week - raising further doubts about their financial muscle heading into the summer market.
Rafa Benitez's frustration at being blown out of the water by Manchester City for the £12million capture of Gareth Barry from Aston Villa is set to be compounded by missing out on versatile Spain star David Silva.
The Valencia midfielder, who can play wide on the right or through the middle, has welcomed the advances of Real Madrid after his representatives were yesterday summoned to talks at the Bernabeu.
Silva said: 'I do not know about anything that has happened because I have been at my home in Canary Islands and I have not spoken to my agent.
'Valencia should not worry though. The fact that a team like Real Madrid is interested is good for Valencia and for me.
'For now, I am focused on the national team, I expect that everything will turn out well. It is an honour that a team like Real Madrid are interested, but for the time being, I am with Valencia.'
Liverpool are also preparing to throw in the towel on a bid to sign Glen Johnson as Chelsea close in on a deal with Portsmouth for their former right-back.
Benitez is not only struggling to land his preferred transfer targets, he is also facing a raid on his team for Xabi Alonso - who Sportsmail revealed as also being a Madrid target - and now reports are linking Javier Mascherano with a move to Barcelona.
Liverpool midfielder Xabi Alonso
Sportsmail today documented the state of the club's finances. Accountants KPMG LLP warned there is 'significant doubt on the group's and parent company's ability to continue as a going concern' because of the club's debts.
Though Liverpool's most recent accounts showed a profit of £10.2million, their parent company Kop Football (Holdings) Ltd lost £42.6m, mainly due to interest payments of £36.5m.
Hicks and Gillett face a July 24 deadline to refinance their £350m debt, which they remain optimistic about meeting it.
Benitez's transfer budget is believed to be as little as £15m, plus anything generated from sales, but that figure is unlikely to be enough to alone sign Silva.
Silva's agents, Julio Llorente and Amadeo Rangel, yesterday spent an hour-and-a-half meeting Madrid’s sporting director Miguel Pardeza and general director Jorge Valdano.
Valencia are likely to want at least £20m, but are constrained by the need to sell because of debts believed to be about £400m.
Their president Vicente Soriano last night resigned after failing to turn around the club's finances and declared he didn't want to be the man who sold Silva and fellow Mestalla star David Villa.
Liverpool are now bracing themselves for a £22m bid from Barcelona for Mascherano.
Catalan newspaper Sport - which is close to the Nou Camp club - today reports that Barca boss Pep Guardiola has discussed a move for the Argentina captain with his director of football Txiki Begiristain, the club's dealmaker.
They are aware a transfer could be tricky, particularly if Liverpool do cash in on Alonso, but believe the 24-year-old former West Ham United player is unsettled following reports that his agent offered the player to Real Madrid recently.
Barca are considering sweetening a deal with the part exchange of France left-back Eric Abidal, who they believe is a target for Benitez.