Real Madrid's failure in overturning their two-window transfer ban on appeal to the Court of Arbitration for Sport (CAS) looks to have dealt Chelsea a killer blow in terms of their rumoured interest in Portuguese international Pepe.
Real, along with city rivals Atletico, saw their transfer embargoes, the same type that was also imposed on Barcelona after being found to have breached FIFA rules on signing youth players under the age of 18, upheld by CAS.
According to the Daily Mirror, Chelsea had been eyeing a potential free agent deal for Pepe next summer. The Euro 2016 winner's current Real contract is due to expire in June 2017 and he will be eligible to speak to potentially sign a pre-contract with foreign clubs from January.
However, it is said that given their inability to register new players until January 2018 at the earliest, Real are now looking to offer Pepe a new contract that would extend his stay in Madrid.
An extension to June 2019 is potentially in the offing, removing any chance Chelsea would have of landing the veteran centre-back for nothing.
For Real, more so than Atletico, the ban on new players could have significant impact on who is allowed to leave the Bernabeu over the next 18 months.
Despite interest in Paul Pogba, Los Blancos only signed Alvaro Morata this summer and must now rely on the promotion of youth to serve any of their players needs as and when they arise.
As far as Chelsea are concerned, centre-back is likely to be an area of much change under Antonio Conte. The club re-signed David Luiz on transfer deadline day after failing to land any earlier targets, while John Terry is very much in the twilight of his career. There are also severe doubts about Kurt Zouma's long term future at Stamford Bridge.
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