Lenders query Allen's Charter control ex-bankruptcy

* Charter CEO says unaware of bondholders plans for board

* Lenders question Allen's control post-bankruptcy

* Charter seeks approval for reorganization plan

By Yinka Adegoke

NEW YORK, July 22 (Reuters) - U.S. cable operator Charter Communications Inc CHTRQ.PK Chief Executive Neil Smit told a court on Wednesday he is not aware of any plan by bondholders to take control of the board when the company emerges from bankruptcy.

The company's senior bank lenders, led by JPMorgan Chase & Co (JPM.N), have been opposed to Charter's bankruptcy plan, which the company is hoping will win approval during a hearing in U.S. Bankruptcy Court in Manhattan this week.

The bank lenders argue Charter violated its loan agreements as the bankruptcy reorganization plan would change control of the company from Microsoft (MSFT.O) co-founder Paul Allen, constituting a default that would make debt reinstatement impossible.

Lawyers for the lenders on Wednesday focused on the seven board seats that bondholders including private equity firm Apollo and funds Oaktree, Crestview and Franklin might be able to control as holders of new Class A shares of the reorganized company.

The current plan allows Apollo to appoint two directors and Oaktree and Franklin to appoint one director each. Each party would need to have some of their debt holding converted to at least 10 percent of undiluted Charter equity to take control of seven board seats.

The reorganization plan also allows Charter's current controlling director Allen to appoint four directors of his own as the sole holder of controlling Class B shares. One of the board seat's would be Smit's, in line with the terms of his employment contract.

Lawyers for the lenders repeatedly asked Smit whether having more board members would effectively give the bondholders control of the board. Smit accepted they could out-vote Allen saying "Seven is more than four, yes".

But Smit said he had no idea if the various bondholders had any plans to work together.

Charter filed for bankruptcy protection in March, buckling under $21.7 billion in debt, but said at the time it had reached agreements with key stakeholders that would allow it to exit bankruptcy in a matter of months.

If Charter wins approval of the plan from Judge James Peck it would allow the company to shed more than $8 billion in debt while also reinstating about $11 billion of its senior bank debt at below-market interest rates upon its emergence from bankruptcy.

Charter's case has been closely watched in the restructuring industry as a test of the debt reinstatement concept, which has been rarely used but is supposed to be allowed under U.S. laws if the company has no other default under its debt agreements except for its bankruptcy filing.

If Charter, the fourth-largest U.S. cable operator, were unable to reinstate its debt at pre-bankruptcy levels, it would have to renegotiate with its banks and re-price the debt at significantly higher interest rates. The company's interest payments could increase by more than $500 million annually if that were to occur, according to court papers.

The court heard on Tuesday that Charter held talks to sell itself to private equity and also held talks to raise cash with Comcast Corp (CMCSA.O) and Time Warner (TWX.N) before filing for bankruptcy.

The case in re: Charter Communications Inc., U.S. Bankruptcy Court, Southern District of New York, No. 09-11435. (Reporting by Yinka Adegoke, additional reporting by Emily Chasan; Editing by Tim Dobbyn)