European football governing body UEFA is set to refuse AC Milan's application for a voluntary agreement regarding Financial Fair Play rules, Italian press said on Thursday.
With a loss of some 255 million euros ($300m) over the last three seasons, fallen Italian giants Milan are some way from complying with UEFA's limit of 30 million euros in losses over that same period.
Chinese-owned Milan had been hoping for a negotiated agreement to avoid incurring any penalties but La Gazzetto dello Sport claimed that "UEFA says no to Milan's plan" and described it as "a tough blow for the rossonero club".
Milan responded by saying they had "always said we're ready to face the other side of the coin", meaning they are prepared to sign a "settlement agreement" with UEFA.
Settlement agreements are financial penalties and squad and salary restrictions imposed on clubs that fail to adhere to UEFA's rules.
The most severe handed out so far were to Paris Saint-Germain and Manchester City in 2013/14 when both were fined 60 million euros (40 million of which was later refunded) and had their 25-man European competition squads reduced to 21 players.
Such sanctions only come into play if teams qualify for Europe and Milan are currently eighth in Serie A, five points and two places off a Europa League berth.
Despite a 200-million-euro investment from Chinese owner Li Yonghong during the close season, Milan have stuttered badly after a strong start saw them win four of their first five matches, recording just two victories in their 10 league encounters since.