Corn ethanol maker Aventine files for bankruptcy

A process operator shows a handful of corn at the GreenField Ethanol plant in Chatham, Ontario, in this April 10, 2008 file photo. REUTERS/Mark Blinch/Files

NEW YORK (Reuters) - Aventine Renewable Energy Holdings Inc AVRN.PK, a maker of corn ethanol, has filed for Chapter 11 bankruptcy protection, after suffering from declining liquidity and margins.

The Pekin, Illinois-based company and six affiliates filed for protection from creditors on Tuesday with the U.S. bankruptcy court in Wilmington, Delaware. It said it had $799.5 million of assets and $490.7 million of debts at year-end.

In a court filing, Chief Accounting and Compliance Officer William Brennan said Aventine faced declining liquidity amid frozen credit markets, in part because of a large investment in auction-rate securities.

He also said Aventine was hurt by narrowing spreads between ethanol and corn prices. Brennan said gross margins have been negative since mid-2008 in part because of fixed obligations to buy corn and natural gas at above-market prices.

In late October, Aventine's larger rival VeraSun Energy Corp VSUQE.OB also filed for bankruptcy protection.

The case is In Re Aventine Renewable Energy Holdings Inc, U.S. Bankruptcy Court in Delaware (Wilmington), No. 09-11214.

Reporting by Jonathan Stempel; Editing by Steve Orlofsky