The former Leeds United star has fallen out of favor with club and country in recent months.
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Per Manchester Evening News, City would prefer to permanently sell a player who cost £45 million two years ago.
However, they may have to settle for a loan deal that includes an option or obligation to buy.
Even if a club does secure Phillips permanently, they will not pay a fraction of that hefty fee City paid Leeds.
Phillips wants to play more regularly to resurrect his career and is adamant about leaving City.