The veteran striker was heavily linked with a move to Sunderland, whose manager Martin O'Neill made his interest in the 35-year-old known to Coyle.
However, the Scottish boss has revealed that Davies was not keen on leaving the Reebok Stadium.
"There was an interest but that was in the press before it came to my attention," said Coyle. "I told Kevin he was a big part of our plans. He didn't want to leave so for me it was dead in the water. Martin rang in the end.
"I said to Martin the only way Kevin would leave is if he wanted to and that was never the case. That was the finish before it started."
Davies joined Wanderers in 2003 from Southampton.