Struggling departments store House of Fraser has failed to raise funds of £40m from London-based investment firm Alteri Investors as talks collapse.

The talks failed as the retailer’s assets are already pledged as collateral to lenders, led by HSBC, against existing debts of £400m.

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The Chinese tycoon Yuan Yafei-owned retailer plans to raise funds to refinance the business or extend the terms of £224m of debt that matures in July 2019.

The group has also been seeking rent reductions from some of its landlords.

House of Fraser, which has 59 stores and employs 17,500 people, experienced a 2.9% reduction in sales during the Christmas period of 2017 compared to the same season in 2016.

In addition to last year’s £10m, the company also planned to make £16m of cost cuts this year.

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“The chain’s financial difficulties may fuel the speculations that House of Fraser could be the next retailer to run into trouble.”

House of Fraser spokesperson said: “House of Fraser is a privately-owned business. We have the full financial support of our shareholders.”

Alteri, supported by US-based Apollo Global Management, was involved in the sale of Jones Bootmaker to Endless last year and in the purchase of CBR Fashion Group from EQT this year.

Yafei’s company Sanpower, acquired House of Fraser in 2014 with plans to expand the brand’s business in China.

The chain’s financial difficulties may fuel the speculations that House of Fraser could be the next retailer to run into trouble.

Recently the retail industry has seen several casualties, including Mothercare, Carpetright and New Look, due to online retail growth.

Last September, Sanpower injected £25m into the business as losses touched almost £9m.

This month, Sanpower brought in further uncertainty as it announced the sale of 51% stake to Chinese tourism group Wuji Wenhua.