http://online.wsj.com/article/BT-CO-20090518-711449.html

NEW YORK (Dow Jones)--Production units of biofuel maker Pacific Ethanol
Inc. (PEIX) filed for bankruptcy protection Monday amid pressure from weak
demand and low prices.

The parent company and its marketing units didn't file for bankruptcy
protection. Pacific Ethanol said it would continue operating its four
wholly owned ethanol production plants in California, Oregon and Idaho
under an asset management agreement, and would continue selling its
product under current marketing agreements.

Shares of Pacific Ethanol were recently trading nearly 45% lower at 31
cents apiece.

Analysts said the bankruptcy filing didn't come as a surprise.

"Pacific Ethanol's liquidity position has been bleak to say the least,"
analysts at Raymond James Financial Inc. (RJF) wrote in a note to clients.
They noted that the company had earlier this year defaulted on its
construction-related term loans, its revolving line of credit and other
debt, but that it was unclear whether Nasdaq would quickly delist the
parent company, which remains outside the bankruptcy filing.

"Either way, however, we see essentially no value left in the common
shares," wrote the analysts, Pavel Molchanov and Cory Garcia.

Once a high-flying ethanol producer, Pacific Ethanol enticed Bill Gates
and hedge fund manager Paul Touradji as early investors in 2006. But the
Sacramento-based ethanol producer has suffered losses due to a downturn in
ethanol margins. High corn prices and low demand for the fuel, which is
blended with gasoline, cut into producers' earnings last year.

Rival ethanol producer Aventine Renewable Energy Inc. (AVRN) filed for
bankruptcy protection last month amid the industry downturn while Verasun
Energy Corp. (VSUNQ) was forced to sell most of its assets to oil refiner
Valero Energy Corp. (VLO).

Chief Executive Neil Koehler said the market for ethanol has been
challenging in the last several quarters, but the company is confident
"that a restructured company will grow and prosper as the demand for low-
carbon fuels increases."

Pacific Ethanol has been struggling to refinance loans. In March, it won
extensions of its forbearance agreement with lenders as it continued to
negotiate new loan terms. But that expired at the end of April.

The units that filed Chapter 11 own the company's four wholly owned
ethanol production facilities. It said under its credit agreement dated
Feb. 27, WestLB AG and other lenders have agreed to provide debtor-in-
possession financing of up to $20 million.

Pacific Ethanol also said Monday that Kinergy Marketing LLC, one of the
units that didn't file for bankruptcy protection, got some more breathing
room on its credit facility with Wells Fargo & Co.'s (WFC) Wachovia, which
agreed to continue providing up to $10 million for the unit's working-
capital needs.