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Charter argues its reorg plan is best for all sides

* Lawyers argue all creditors treated fairly under plan

* Charter’s plan opposed by bank lenders

* Judge expected to indicate decision next week

NEW YORK, Sept 23 (Reuters) - U.S. cable operator Charter Communications Inc CHTRQ.PK should be allowed to proceed with a controversial reorganization plan because all creditors are receiving everything they are entitled to, lawyers representing the company told a court on Wednesday.

Charter was in bankruptcy court on Wednesday for closing arguments after 16 days of testimony on why the company should be able to go forward with its proposed reorganization plan. The judge had originally expected testimony to last around 5 days but the legal back and forth ran over in an increasingly complex case.

The move is starkly opposed by Charter's lenders, led by JPMorgan Chase & Co JPM.N and Wells Fargo WFC.N which claim that Charter investors at Apollo, Crestview, Oaktree and Franklin funds are "acting together" to acquire Charter via the bankruptcy, and the proposed plan would cause an improper change-in-control of the company.

During the trial an Apollo executive testified that the funds were not working together as a group.

Lawyers for Charter disputed the banks’ claims, describing some of them as a “charade” and “nonsense.” They also argued that all creditors and Charter would benefit from the outcome of the plan.

“We haven’t discriminated against (Charter) noteholders. We haven’t treated them worse than anyone else,” they told the court on Wednesday.

Charter, which is controlled by Microsoft Corp co-founder Paul Allen, filed for bankruptcy protection in March, buckling under the weight of $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.

Lawyers for JPMorgan argued that Charter’s proposed reorganization plan triggers a ‘change of control’ default clause if Allen no longer has full equity control of the business when it emerges from bankruptcy and the investment funds are calling the shots.

The investment funds “are executing ... a loan-to-own strategy to take control of, and then sell Charter to a strategic acquirer,” JPMorgan argued in court papers filed last week, saying that Charter’s reorganization plan was full of “gimmicks.”

Under the plan, Allen would lose up to $8 billion which he has invested in Charter equity but would retain a 35 percent voting interest.

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 $11.8 billion of its senior bank debt at below-market interest rates upon its emergence from bankruptcy. Peck has said he expects to give an indication on his ruling by the end of this month.

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 and its entire reorganization plan would have to be rehashed, according to court papers.

The case in re: Charter Communications Inc., U.S. Bankruptcy Court, Southern District of New York, No. 09-11435.

Reporting by Yinka Adegoke and Emily Chasan; Editing by Richard Chang