April 28 (Bloomberg) -- Charter Communications Inc., the bankrupt cable company that delayed its reorganization amid creditor objections, faces new complaints about a $99 million transfer and a settlement with Chairman Paul Allen.

Law Debenture Trust Co. of New York, trustee for $479 million of 6.5 percent notes due 2027, said yesterday that the transfer, made months before Charter’s bankruptcy, may be fraudulent. It also questioned a settlement giving $175 million in cash, $85 million in notes and as much as $20 million in cash for restructuring to entities controlled by Allen, the co- founder of Microsoft Corp.

“It is unclear what, if anything, the Debtors are actually settling,” lawyers for Law Debenture wrote.

Lenders holding $2 billion in Charter’s debt said in court documents filed yesterday in Manhattan that the plan can’t work, backing other creditors who claim that because Allen cedes control through the reorganization, the company can’t replace $11.8 billion in debt on the same financial terms.

“The plan would effect a massive transfer of actual ownership and control away from Mr. Allen to other parties in the corporate structure -- junior creditors acquiring equity in return for their under-water debt and additional cash,” lawyers for the lenders wrote.

Charter, based in St. Louis, said April 23 that it would delay a hearing on the plan until May 5 that had been scheduled for April 29. The adjournment also affects motions to set dates for voting on the plan.

Banks’ Objections

Wells Fargo & Co., which represents third-lien secured lenders owed $350 million, and JPMorgan Chase, an agent for a separate group of lenders, have both objected to the plan’s reinstatement of $11.8 billion in debt, saying that retaining the existing terms doesn’t account for risks involving a change in control.

Unsecured creditors said in court documents yesterday that they support Charter’s motion to dismiss the adversary lawsuit brought by JPMorgan. The committee of unsecured creditors believes there were no defaults on Charter’s debt before its bankruptcy, which should make them able to replace the debt on its current financial firms, lawyers for the group said.

“This court should not entertain JPMorgan’s effort to engage in piecemeal litigation,” creditors said, urging U.S. Bankruptcy Judge James Peck to dismiss the suit and deal with the issue of debt reinstatement at a final hearing to confirm Charter’s plan.

The bankruptcy case is In re Charter Communications Inc., 09-11435, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The adversary case is 09-01132, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York Bankruptcy Court at tkary@bloomberg.net.

Last Updated: April 28, 2009 17:18 EDT