NEW YORK, March 28 (Reuters) - Rite Aid ( RADCQ ), one of the

largest U.S. pharmacy chains, received permission from a U.S.

judge on Thursday to begin voting on a bankruptcy restructuring

plan that would turn over most of the company's equity to its

bondholders, while still leaving open the possibility of a sale.

U.S. Bankruptcy Judge Michael Kaplan approved Rite Aid's ( RADCQ )

voting proposal at a court hearing in Trenton, New

Jersey, saying that the bankruptcy case needed to move quickly

to avoid further restructuring costs that could push the company

into liquidation.

"Every day engenders additional cost and risk," Kaplan said.

"We just don't have the luxury of kicking this can down the

road any more."

The company filed for bankruptcy in October, seeking to

address its high debt, shut down underperforming retail

locations, and sell off non-core business units.

Rite Aid's ( RADCQ ) bankruptcy plan, revised on Thursday, would cut

$2 billion in debt and provide $47.5 million to junior

creditors, including individuals and local governments who have

sued the company for allegedly ignoring red flags and illegally

filling prescriptions for addictive opioid medication.

Rite Aid ( RADCQ ), which has denied wrongdoing, is still finalizing

some of the settlements that are critical to the restructuring,

including an agreement that would resolve a U.S. Department of

Justice investigation into Rite Aid's ( RADCQ ) opioid sales.

But lawyers for the company said it is ready to solicit

votes from bondholders, who are the critical voting class in its

bankruptcy.

No other group will be entitled to vote in Rite Aid's ( RADCQ )

bankruptcy, and the bondholders' votes are due on April 15.

Kaplan said Rite Aid's ( RADCQ ) voting proposal was "unusual,"

because it did not allow any votes from creditors who are last

in line for repayment.

But he agreed with Rite Aid's ( RADCQ ) conclusion that the company

would not have enough money to pay those creditors after paying

higher-priority debt including bank loans and bonds.

Rite Aid ( RADCQ ) said in court papers that junior creditors would be

receiving $47.5 million as a "gift," which would not have been

possible without the settlements with higher-priority creditors.

Attorneys representing Rite Aid's ( RADCQ ) junior creditors,

including its opioid creditors, said that they supported the

settlements and they did not object to their clients' inability

to vote in the bankruptcy.

"The plan initially said that unsecured creditors are

getting nothing," said Arik Preis, an attorney representing

opioid victims in the case. "We're now getting quite a bit."

Rite Aid ( RADCQ ) and its creditors have not yet determined how the

$47 million allotment to junior creditors will be divided

between opioid victims and other creditors.

Junior creditors will also receive a 10% equity stake in the

reorganized Rite Aid ( RADCQ ), as well as the ability to pursue

additional recoveries through further litigation or insurance

payouts.

Bondholders are still interested in exploring a sale of the

company, and Rite Aid's ( RADCQ ) revised bankruptcy plan allows those

negotiations to continue in parallel with the restructuring,

according to Andrew Rosenberg, an attorney for bondholders

including include Brigade Capital Management, HG Vora Capital

Management, and J.P. Morgan Investment Management.

"The sales process is ongoing with multiple active and

engaged bidders," Rosenberg said at the hearing.

Rite Aid ( RADCQ ) expects to seek final court approval of its

restructuring on April 22. It received bankruptcy court approval

to sell its pharmacy benefit company, Elixir, in January.

(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and

Costas Pitas)