The U.S. Bankruptcy Court for the District of Delaware on Monday granted ethanol producer VeraSun Energy Corp.'s emergency request for debtor-in-possession (DIP) financing, which will help keep the company's doors open while Chapter 11 bankruptcy proceedings take their course.

"The relief granted by the court (Monday) will allow us to focus on our operations and, at the same time, provide VeraSun with the liquidity and ability to continue operations, which means producing ethanol and distillers grains, paying suppliers and satisfying customer needs for product," Chief Executive Officer Don Endres said in a statement.

The company is in negotiations to get a total of $250 million in DIP financing. VeraSun said on Monday that it had received commitments for up to $215 million in DIP financing to pay bills from certain holders of senior secured notes and from groups of lenders led by AgStar Financial Services of Mankato, MN.

A judge said VeraSun can borrow up to $40 million from the financing to keep its doors open and authorized the use of cash collateral to enable the company to operate its business, according to a VeraSun press release.

VeraSun filed a rare bankruptcy request with the court Monday, asking that secured note holders be approved to provide up to $25 million of interim DIP financing, and up to $190 million in final DIP financing to support the working capital needs of VeraSun's debtors.

This was in addition to a request that AgStar "provide up to $17 million of DIP financing on an interim basis and up to $30 million on a final basis to fund the working capital needs of the seven U.S. BioEnergy debtors presently financed by the AgStar Facilities," according to court documents. VeraSun purchased U.S. BioEnergy earlier this year.

In its filing, VeraSun said it would not be able to make this week's payroll without the help. The company said it also needed money to buy corn, natural gas, pay for leases and other costs.

VeraSun Energy Corp., one of the nation's largest ethanol producers, filed for Chapter 11 bankruptcy protection late on Friday, citing severe liquidity problems.

According to a news release issued Friday by VeraSun, the bankruptcy filing by the Sioux City, SD-based company and 24 of its subsidiaries was “precipitated by a series of events that led to a contraction in VeraSun's liquidity, impairing its ability to operate its business and invest in production facilities."

"Worsening capital market conditions and a tightening of trade credit resulted in severe constraints on the company's liquidity position," the company said.

VeraSun put itself up for sale in September after making bad bets on the corn market over the summer as grain prices reached record highs, resulting in significant losses for the company. That came just as the U.S. economy began deteriorating.

VeraSun’s bankruptcy is the latest in a string of events that has badly tarnished the ethanol industry’s image within the investment community.

Goldman Sachs Group Inc.’s analysts abandoned coverage of the ethanol industry on Monday citing VeraSun’s bankruptcy filing and plunging market valuations for other ethanol producers.

Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.