Gateway Ethanol has filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Kansas.

The City of Pratt is one of several entities listed as creditors in the case. Locally, Ninnescah Electric and SC Telcom are also listed as creditors.

Pratt took on a bond issue to construct a water line for the ethanol plant. The plant agreed to service the debt on the bond issue and make monthly payments to the city, said Pratt City Attorney Ken Van Blaricum.

The city will now file claims to cover the debt on the bond issue.

“We will file our claims. That’s how we are proceeding,” Van Blaricum said.

According to the petition, Gateways assets are listed between $50 million and $100 million. Their estimated debts are also between $50 million and $100 million. The number of creditors is between 50 and 99.

The bankruptcy petition automatically stays a receivership case against Gateway. Dougherty Funding LLC, the primary lender for the plant, filed the receivership because Gateway owes them $63 million, according to the Associated Press.

The petition stays any other legal actions by creditors or any claims before the petition was filed, according to the U.S. Courts web site for Chapter 11.

The Certified Resolutions for Gateway state that the petition for Chapter 11 is filed “…in the best interests of the Company, its creditors, shareholders and other interested parties…”

A hearing was held Tuesday in bankruptcy court to evaluate all the motions within the petition. The hearing will determine which petition motions will proceed.  

This bankruptcy is voluntary petition. Gateway, the debtor, is filing petition their selves. A creditor wanting to collect money owed to them would file an involuntary petition but that is not this case.

Gateway remains debtor in possession. They continue to operate and mange the business.

Tim Barker, president and chief executive officer for Orion Ethanol that owns controlling interest in Gateway Ethanol, said that he could make no comment concerning the bankruptcy or the receivership with Dougherty.

Gateway Ethanol began producing in November 2007. In December 2007 the area was hit with an ice storm that knocked out power to the plant for five days and caused millions of dollars of damage.

The price of grain increased substantially and the price of ethanol went down. The combination plus other factors put Gateway in financial distress. The plant ceased operations while efforts were made to refinance operations including the increased price of corn and sorghum. After months of work those efforts were unsuccessful. 

The estimated value of the plant is $100 million. The plant was designed to produce 55 million gallons of ethanol per year and use approximately 18 million bushel of grain.