House of Fraser has been dealt a potentially fatal blow after confirming the collapse of a financial rescue deal from its Chinese white knight.

C.banner, the Hong Kong-listed owner of Hamleys, said on Wednesday that a dive in its own share price meant plans to raise £150m to invest in the struggling department store group had been “rendered impracticable and inadvisable”.

The announcement marks the end of hopes that C.banner will step in to support House of Fraser, which is urgently seeking £50m to avoid collapse.

A fall into administration would put about 17,000 jobs at risk, affecting mostly people working for other brands’ concessions within House of Fraser stores rather than directly for the retailer.

House of Fraser said it was in discussions with alternative investors and “exploring options to obtain the required investment on the same timetable”. The troubled department store chain is talking to lenders and potential investors that include Sports Direct’s owner, Mike Ashley.

The retailer is struggling to meet its quarterly rent bill of nearly £25m due late September and fund the purchase of millions of pounds of stock for the peak Christmas trading period. It also wants about £10m to pay down an expensive short-term overdraft. The financial troubles have led it to be judged in technical default on millions of pounds worth of loans after securing a court-approved extension of repayment deadlines last week.

Suppliers are already beginning contingency planning for House of Fraser’s potential collapse.

One source said remaining cover from credit insurers, whom suppliers use to protect themselves from the risk of not being paid, was likely to be withdrawn due to C.banner’s exit.

“It’s a very serious situation,” said one supplier, who said their business would have to consider whether it was contractually obliged to continue providing goods to House of Fraser or whether it could demand payment upfront. “We are a company with a strong balance sheet but we are not in the business of playing poker.”

Talks with new backers were in train as C.banner had already warned its shareholders that the planned investment in House of Fraser, originally slated for this summer, could be delayed until late October.

It blamed the delay on legal action by landlords against House of Fraser’s planned restructure, which would involve the closure of 31 of its 59 stores. C.banner’s investment deal was contingent on the restructure being finalised.

C.banner had expected to raise net proceeds of HK$1.48bn (£140m) by placing shares at about HK$2.70 a share to fund plans to invest £70m in House of Fraser. It also planned to invest a further £70m in buying shares in the department store from the majority shareholder, Nanjing Cenbest, part of China’s Sanpower conglomerate.

C.banner’s share price has fallen more than 70% to HK$0.71 since 1 June, when it announced the placing. On Wednesday, it issued a profit warning, telling investors it expected to make a RMB20m (£2.24m) loss in the six months to the end of June, compared with a RMB 39m (£4.36m) profit a year before; this was partly a result of an increase in finance costs.

In a statement issued to the Hong Kong stock exchange about its planned share placing, C.banner said: “In view of the fact that the recent market prices of the shares as quoted on the stock exchange have significantly dropped to a level which is far below the placing price range of HK$2.40 to HK$3.00 per placing share, the company and the placing agent are of the opinion that the placing has been rendered impracticable and inadvisable, and therefore no longer intend to proceed with the placing.”