Neil Lennon claims the loss of Hearts from the Clydesdale Bank Premier League would leave Scotland's top-flight without its second and third biggest clubs.
Fears that the Gorgie club could be relegated grew after majority shareholder UBIG, a Lithuanian investment firm, was yesterday listed on a government website of insolvent firms after reportedly declaring itself unable to meet its liabilities.
If deemed to fall foul of the SPL's insolvency rules, Hearts would be deducted a third of last season's total - 18 points - which would see them in the Irn-Bru First Division next season.
A decision which will be taken when the SPL board meet on Monday.
Ahead of the last Premier League game of the season against Dundee United at Tannadice on Sunday, the Hoops boss examined the possible demise of the Tynecastle club with the experience of rivals Rangers, who emerged in the Irn-Bru Third Division last season after their descent into liquidation, in mind.
"We would be losing probably the third biggest club," he said.
"We have already lost the second biggest so it doesn't look good.
"It is a pretty sad situation. It is a great club with a great tradition and this time last year they were in a cup final.
"I don't know, the powers-that-be will maybe have contingency plans in place. I don't know if another club will be promoted, Morton maybe, I don't know.
"I only became of aware of the serious nature of it late last night.
"I don't have a crystal ball, I don't know what sort of damage it will do to the SPL, but there will be an outcry.
"Hearts have a decent support for a club in Scotland and to lose that would be pretty damaging."
"It is a pretty sad situation. It is a great club with a great tradition and this time last year they were in a cup final" - Neil Lennon
Lennon expressed his sympathy for his Jambos counterpart Gary Locke, who was only made permanent manager in March.
"It seems to have been going on for quite a while," said the Northern Irishman.
"This time last year the players weren't getting their money, but they kept on going and showed tremendous loyalty to Hearts.
"They went on to win some silverware and now they find themselves in probably a worse situation than ever and Gary has been thrown in at the deep end.
"I don't know if he will be aware of everything going on but knowing his character, I'm sure he will see it through okay."
Asked if the situation could affect Lennon bringing players to the club in the summer, Lennon said: "I don't think it helps.
"I am not sure many players look at other clubs in Scotland.
"When they are coming here they look at what we can offer them in terms of you are going to play in a championship (winning) team and you are going to play in the Champions League and you have the chance of winning silverware and I think that preoccupies their mind more than anything else."
Lennon, was coy when asked about his own future with the SPL champions.
The former Celtic skipper, who has been linked with Everton and Stoke City, revealed he is soon to speak to the Hoops board about a new contract.
He said: "It's not being confirmed yet but I am hoping to do that over the next week or so.
"These negotiations are private and that is between me and the board so I am not going to talk publicly about that."
The Celtic manager confirmed he has taken South African midfielder Daylon Claasen is on trial.
The 23-year-old was contracted to Belgian side Lierse before being released last month.