Ampal-American Israel Corp filed for Chapter 11 bankruptcy protection as it faces deepening financial troubles in the wake of a halt to natural gas supplies to Israel from Egypt.

Ampal holds 12.5 percent of East Mediterranean Gas Company, the sole supplier of gas from Egypt to Israel until the Egyptian government canceled its 20-year agreement signed in the Mubarak-era earlier this year.

It filed a voluntary petition for Chapter 11 reorganization in the US Bankruptcy Court for the Southern District of New York.

Ampal has sought to renegotiate agreements with its bondholders on three series of bonds for eight months and has proposed postponing paying the principle on its bonds by two years while offering bondholders shares in the company.

Its bond prices were down 4–6 percent on Thursday.

"At this time, the company has determined that the best forum to continue negotiations and to seek approval of a restructure plan is through the Chapter 11 process," Ampal said in a statement.

"The company expects to work closely with its Debenture holders, creditors and other stakeholders to implement a restructuring plan through the Chapter 11 case, and to emerge as a financially stronger company."

EMG is also 12.5 percent owned by Israel's Merhav. Other stakeholders include Egyptian businessman Hussein Salem, the Egypt Natural Gas Company, Thailand's PTT and US businessman Sam Zell.