* U.S. bankruptcy judge must review refusal to halt lawsuits
* Caesars wants a decision before a March trial in New York
* Timing may coincide with release of key examiner's report
By Tracy Rucinski
CHICAGO, Jan 29 (Reuters) - The bankrupt operating unit of Caesars Entertainment Corp will soon ask a U.S. judge to shield its parent from $12 billion of lawsuits to facilitate a debt-cutting rescue deal, but approval could set a bad precedent for creditors.
Hedge fund bondholders have sued Caesars in New York and Delaware over guarantees on the bankrupt unit's debt. While Caesars has said the lawsuits are without merit, it has warned it could join its operating unit in bankruptcy if rulings go against it.
In July, U.S. Bankruptcy Judge Benjamin Goldgar in Chicago denied a request by Caesars to stay the lawsuits, but a U.S. appeals court has since said that ruling should be reviewed.
The case returns to Goldgar early next week, handing yet another task to a judge who has expressed frustration over the complex web of dense, bitter litigation in the bankruptcy.
"Granting a stay would offer the benefit of bankruptcy protection without actually filing for Chapter 11 and puts huge pressure on everyone to work out a deal. It could create a bad precedent," said Charles Tabb, a bankruptcy expert at the University of Illinois College of Law.
Junior creditors have refused to support a bankruptcy restructuring plan that envisions splitting the operating unit into a casino operator and a separate property company.
They have accused Caesars of looting the operating unit of its best assets before last year's Chapter 11 filing to benefit private equity owners Apollo Global Management LLC and TPG Capital. Caesars has said the transfers were fair.
The casino group, formed by the 2008 buyout of Harrah's, hopes that an independent investigation into pre-bankruptcy transactions will help pave a path for resolution among warring creditor groups.
Junior creditors believe the court-ordered investigation, which examiner Richard Davis plans to release by the end of February, will at the least show that Caesars must pump more money into the restructuring plan than the $1.5 billion it has pledged.
Caesars had asked Judge Shira Scheindlin in New York to postpone two trials on the hedge fund lawsuits until 60 days after the release of the examiner's report. She denied the request.
The company's last hope is for Goldgar to stay those lawsuits before the first of those trials begins on March 14.
University of Michigan law professor John Pottow expects Goldgar to act quickly. "He is aware of the importance of the parallel proceedings unfolding in other courts." (Editing by Matthew Lewis)