In a move that should have surprised no one, cellulosic ethanol maker KiOR on Sunday filed for Chapter 11 bankruptcy protection. According to the filing, KiOR will seek approval from the court for an auction and sale of its assets.

The first bid in that auction came from affiliates of Vinod Khosla, a long-time entrepreneur and venture capitalist who was a founder of Sun Microsystems and who has invested in many green energy companies in the past decade.

KiOR has agreed to a debtor-in-possession financing deal with an affiliate of Khosla’s, which will provide $15 million of additional financing to keep the company operating during the bankruptcy and to facilitate the sale and restructuring process. The company is requesting that the asset auction be held in December and the completion of the sale accomplished as soon as possible after the auction.

The company’s shares were de-listed from the Nasdaq on November 6, and KiOR does not expect any recovery for existing common stock shareholders as a part of the bankruptcy proceedings.

In the over-the-counter market on Monday morning, KiOR shares traded at around $0.03 a share. More than the average daily volume of 1.2 million shares had already changed hands within the first hour of trading.

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