A group of hedge funds sued the four banks that funded Tribune Co.’s 2007 leveraged buyout, alleging that the lenders knowingly rendered the company insolvent and precipitated its 2008 bankruptcy.

The suit, filed on Friday in New York state court, charges JPMorgan Chase, Merrill Lynch Capital Corp., Citicorp North America Inc. and Bank of America with breach of contract, breach of good faith and negligence. It asks the court to set damages.

The dispute is not technically part of Tribune Co.’s litigious bankruptcy case, which is playing out in the U.S. Bankruptcy Court in Delaware.

But it arises from the same failed transaction led by Chicago real estate magnate Sam Zell that has become the focus of the bankruptcy. The hedge fund group’s attorney, Howard Kaplan of Arkin Kaplan Rice in New York, said the suit is designed to put pressure on the banks who have used their clout in bankruptcy court negotiations to frustrate the hedge funds and seek releases from litigation for themselves.

“The banks have sought to use the bankruptcy process as a shield to protect themselves,” Kaplan said.

The hedge funds, which include Alden Global Capital and Greywolf Capital, own more than $800 million of the $8 billion in Tribune Co. buyout and refinancing debt that was syndicated by the bank group in June 2007 after the first step of the controversial two-step transaction closed.

Though there was always a plan to add $3.7 billion in additional debt via a second step of the transaction, the hedge funds allege that the company’s performance had deteriorated so sharply after the first step that the banks never should have funded the second.

Echoing charges raised by junior creditors in the bankruptcy case, the Alden group alleges in the New York suit that the lenders knew the second step would render the company insolvent. But they claim that the banks pushed ahead anyway, “improperly motivated by tens of millions of dollars worth of fees and the desire to curry favor with the billionaire Zell.”

Relying on an investigation that was ordered by the Delaware bankruptcy court and carried out by court-appointed examiner Kenneth Klee, the hedge funds allege that the banks’ own internal analyses showed that the additional step-two debt would, in one Merrill official’s words, leave Tribune “not a solvent company.” That breached the credit agreement, which required that the second step be completed only if Tribune could demonstrate its post-closing solvency.

Significantly, the suit also seeks to have a court declare that certain “sharing provisions” in the credit agreement to not apply to the funds’ recovery in the case. The banks have claimed in the bankruptcy case that those contract provisions require that the lenders to both step one and step two share any recovery from a bankruptcy or court proceeding. That would limit what the step-one-only lenders can count on. The funds claim New York law bars such an interpretation when one of the parties is involved in wrongdoing.

Spokeswomen for Bank of America (which owns Merrill Lynch) and Citigroup had no comment on the suit. Attempts to reach a spokeswoman for JPMorgan were unsuccessful.

The hedge fund group is the same one that has dubbed itself the Step-One Credit Agreement Lenders (SoCal) in bankruptcy filings. The group’s lawyer, Howard Kaplan of Arkin Kaplan Rice in New York, said Thursday that the SoCal group also plans to challenge the buyout lenders in bankruptcy court by filing a restructuring plan before a deadline set for Friday night.

The SoCal plan would compete with a plan filed Oct. 22 by the banks, Tribune Co., the committee of unsecured creditors and two other large hedge funds: Oaktree Capital Management and Angelo, Gordon & Co. and will likely center on a step-one friendly interpretation of the sharing provision.

As previously reported, other creditors, including Aurelius Capital Management, the largest junior bondholder, also plan to file alternative plans of reorganization by the deadline.