NEW YORK (Bloomberg) — Bermuda-based Tyco International Ltd. was sued by its bond trustee, Bank of New York Co. Inc., which wants a court order resolving a dispute over how much bondholders should be compensated when Tyco is broken up into three pieces.Yesterday's suit, filed in federal court in New York, is the latest step in the conflict that began last month when American International Group Inc.'s investment management unit sued Tyco to block it from buying back $5.6 billion of debt. AIG said in its suit that bondholders were entitled to about $95 million more than Tyco's offer. Tyco said it is paying market rates.

"We've been given conflicting instructions from Tyco and a majority of the noteholders," Bank of New York spokesman Kevin Heine said yesterday in an interview. "So, we've gone to the court for guidance."

AIG Global Investment Corp. on May 16 withdrew its lawsuit over Tyco's bond tender offer about a week after it was filed. A lawyer for a Tyco bondholders' committee, Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton & Garrison in New York, said this month that he plans to file a new complaint.

After more than two-thirds of its investors refused to tender their securities, Tyco threatened to take away bondholders' right to approve its breakup plan. Tyco said it would void that right by waiving the "majority consent" covenant in its bond indentures. Tyco said less than one-third of its U.S. debt of $5.6 billion was tendered.

Tyco spokesman Paul Fitzhenry didn't immediately return a telephone message placed after business hours.