UPDATE 1-Goody's gets court OK to pay workers, vendors

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NEW YORK, June 11 (Reuters) - Goody's Family Clothing, an apparel retailer that has filed for Chapter 11 bankruptcy protection, said on Wednesday it had received court approval to honor gift cards and pay salaries as well as vendors for goods and services delivered after its petition.

The company has also received preliminary approval to hire an agent to conduct liquidation sales at the 69 stores it intends to close as part of its reorganization plan.

Goody's has identified Hilco Merchant Resources as the lead bidder for the rights to liquidate the stores. If the court approves the agent, store-closing sales would begin as early as the weekend, Goody's said in a statement.

The court agreed to other first-day motions submitted as part of Goody's Chapter 11 filing on June 9, including approval for $210 million in debtor-in-possession (DIP) financing to use for working capital and provide liquidity while the company reorganizes.

"Securing court approval for our first-day motions was a critical first step in Goody's reorganization process," Paul White, Goody's chief executive officer, said in a statement. "These approvals will allow us to continue operations as usual so we can focus on emerging from Chapter 11 as a much stronger company that is better positioned to reach its full potential."

The DIP financing includes a $175 million revolving credit facility from General Electric Capital, a $15 million term loan agreement with GB Merchant Partners LLC and a $20 million junior term loan facility from PGDYS Lending LLC.

Prentice Capital Management, which took Goody's private in 2006, is the managing member of PGDYS LLC.

As of May 31, Goody's operated a chain of 355 moderately priced apparel stores in 20 states, primarily throughout the Southeast. (Reporting by Chelsea Emery, editing by Maureen Bavdek)