The company says it suffered from falling ethanol prices and a lack of credit because of the global economic crisis. Industry sources add that it may also have made poor decisions with ethanol plant investments.

Infinity Bio-Energy is at least R$1bn ($494m) in debt, but has assets of R$1.2bn, according to press reports.

Trading in Infinity’s AIM listed shares has been suspended.

The company also blames a backup during the 2008 harvest because of delays in acquiring equipment, Reuters reports.

Earlier this month, at least one supplier, Comercial Importubos, took Infinity Bio-Energy to court seeking to force the company into involuntary bankruptcy.

A lawyer for Comercial Importubos says that the company owes payments from July 2008, and that other companies are owed at least $1m for supplies and services at one of the company’s distilleries.

Infinity Bio-Energy was established in 2006, and within about a year, it had acquired majority ownership in five ethanol distilleries.

But industry sources say Infinity purchased some businesses that were already suffering from poor cane growing conditions at peak prices.

But Infinity Bio-Energy is the third major ethanol company to fail this month with US producers Pacific Ethanol and White Energy also filing for Chapter 11 bankruptcy protection which allows companies to restructure their finances under court control.