A group of Lehman Brothers Holdings Inc's creditors, including the largest U.S. pension fund and a prominent hedge fund, said they object to the investment bank's Chapter 11 bankruptcy plan.

In a filing in Manhattan bankruptcy court on Tuesday, the group of 12 hedge funds, pension funds and asset managers said the current plan would sow conflict among creditors, and could treat large bank creditors better than other creditors.

This, it said, could result in years of needless lawsuits, delay the deserved recovery of tens of billions of dollars.

The creditors said they are owed $15.5 billion. Among them are the California Public Employees' Retirement System, a pension fund with $211 billion of assets, and Paulson & Co, a $35 billion hedge fund firm run by billionaire John Paulson.

The plan establishes a 'pot' of assets for distribution and pits creditors of the various estates against each other, the filing said.

The plan's proposed allocation of value within the individual debtor estates is seriously flawed, it went on. The stakes are too high for parties in interest simply to hope for global peace and later learn that they have no real ability to develop a case in a contested setting.

Bryan Marsal, a restructuring specialist and Lehman's chief executive, in a statement said the proposed plan is a fair and administratively efficient resolution to the case.

While under one scenario some creditors would be significantly advantaged and others significantly disadvantaged, under a different option the roles would be reversed, he said.

The compromise plan balanced the various conflicting positions and competing interests, Marsal added.

In a court filing on April 14, Lehman proposed that unsecured creditors recover 10.4 cents to 44.2 cents on the dollar.

While general unsecured creditors of the holding company would likely recover 14.7 cents on the dollar, creditors of its derivatives and commercial paper units could recover 21.9 cents to 44.2 cents on the dollar.

Creditors of the derivatives unit include banks such as Bank of America Corp , Credit Suisse Group AG , Goldman Sachs Group Inc and Morgan Stanley .

The creditor group asked U.S. Bankruptcy Judge James Peck to hold a July 14 hearing to consider its objections and set procedures to allow all constituencies to present evidence that will result in an acceptable Chapter 11 plan.

Other creditors in the group are Canyon Capital Advisors LLC, Fiduciary Counselors Inc, Fir Tree Inc, Fortress Credit Opportunities Advisors LLC, Gruss Asset Management LP, King Street Capital Management LP, Owl Creek Asset Management LP, San Mateo County in California, Taconic Capital Advisors LP and Western Asset Management Co.

Lehman filed for bankruptcy protection on September 15, 2008. With $639 billion of assets, its bankruptcy is six times larger than any other in U.S. history.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Jonathan Stempel; Editing by Gary Hill, Leslie Gevirtz)