Brazilian outfit Gremio have rejected reports that they are set to lure Liverpool defender Sebastian Coates back to South America.

It had been suggested earlier this week that the Uruguay international could move in the January window, with the Brazilian side reported to be ready to offer £7million for his services.

Coates has struggled to make any real impact at Anfield since his arrival from Nacional back in August 2011, starting just five Premier League games and scoring one goal - a 'Goal of the Season' contender against QPR last term.

He had an opportunity to impress during Sunday's FA Cup fourth round clash with Oldham at Boundary Park, but endured a miserable afternoon as the Reds were beaten 3-2 by the League One club.

His poor performance led to suggestions that Brendan Rodgers was ready to part company with the Uruguayan, who Kenny Dalglish brought to Liverpool last season.

But Gremio director Rui Costa has denied that they are looking to sign the 22-year-old, telling UOL: "You can forget that, just forget it."

Liverpool had been keen to offload the youngster, who has failed to live up to his price-tag, in order to fund at least one more quality addition to their squad following the signings of Chelsea's Daniel Sturridge and Inter Milan's Philippe Coutinho.

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