Bankrupt Tribune Co. investors have sued JP Morgan, Merrill Lynch, Citicorp, and Bank of America, for arranging $3.7 billion loans in the year 2007, even after knowing that they would not be able to repay the loan amount.

The lawsuit was filed in the New York Supreme Court in Manhattan claiming that the banks collected over $120 million in fees.

The lawsuit that was filed on Friday said, “The Lead Banks knew that this financing was barred by the terms of the Credit Agreement and it was tainted with fraud and other misconduct”.

In the year 2008, Tribune, which owns the Los Angeles Times, the Chicago Tribune, and 23 television stations, filed for bankruptcy. The Company has been trapped in the in bankruptcy court for about two years.

The complainants like Alden Global Distressed Opportunities Fund and Arrowgrass Distressed Opportunities Fund said that the loans that the banks arranged actually prevent Tribune from repaying previous debt amount.

The company along with JP Morgan, Oaktree Capital Management LP, and Angelo Gordon & Co LP has agreed for a plan in which it will give the major part of the equity to these three firms in return for their senior loan claims.