Pacific Ethanol Inc. would surrender ownership of its four production plants to lenders but would continue operating the facilities under a bankruptcy reorganization plan unveiled Monday.

The plan proved instantly controversial with Pacific Ethanol’s stockholders, who sold their shares in droves.

But Neil Koehler, chief executive of the Sacramento ethanol maker, defended the plan. He said the plan retains some value for stockholders even though ownership of the plants would go to lenders.

Shareholders would benefit from fees earned by the company under management and marketing contracts, plus a profit-sharing arrangement with lenders, he said. Pacific Ethanol is also negotiating with lenders, who support the reorganization plan, to give the company equity in the four plants, Koehler said.

In addition, Pacific Ethanol would continue to generate income from its 42 percent stake in a Colorado plant.

Considering that the company’s debts total $293 million, “it’s a very positive outcome,” Koehler said.

In its plan, filed in U.S. Bankruptcy Court in Delaware, Pacific Ethanol said sales of plants by other ethanol firms in bankruptcy protection saturated the market. Pacific Ethanol talked to 15 bidders but got no “fair and reasonable offers.”

The Pacific Ethanol plan needs approval by creditors and the bankruptcy judge.

Pacific Ethanol, which once drew an $84 million investment from Bill Gates, put its four plants in Chapter 11 bankruptcy last May. The company was squeezed by a crash in the price for ethanol, a fuel additive made from corn.

As the market hit bottom, Pacific Ethanol halted production at three of its four wholly-owned plants, including its two California plants in Stockton and Madera.

With prices stabilizing somewhat, it restarted its Idaho plant in January.

The reorganization plan calls for the lenders to grant Pacific Ethanol a fresh $35 million line of credit. Those funds could be used to restart Stockton and Madera.

The $293 million in existing debt would be scaled back to $115 million. The plan was filed in bankruptcy court in cooperation with the lenders, led by WestLB AG.

Pacific Ethanol shares fell 82 cents, to close at $1.17 on the Nasdaq market.

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