07/28/2011 10:40 am ET Updated Sep 27, 2011

Creditors make offer to Alabama county over debt

BIRMINGHAM, Ala (Reuters) - Creditors made a "very attractive offer" to Alabama's Jefferson County to settle its $3.14 billion sewer debt and avoid filing the largest municipal bankruptcy in U.S. history, a senior official said on Thursday.

The county is considering the offer, said John Young, a court-appointed manager for the county's debt-ridden water and sewer system.

"The commissioners have the term sheet and are in the process of considering it. It is a very attractive offer," Young told Reuters. He declined to give details and there was no immediate comment from the county's five commissioners.

The county is set to hold an executive session at 1 p.m. local time (2 p.m. EDT) and has said it will decide whether to pursue further talks, file for bankruptcy or extend a 30-day standstill agreement for talks beyond July 29.

The county, home to Alabama's largest city, Birmingham, made an offer to creditors over the debt earlier this month. One report confirmed as roughly accurate by commissioners said they wanted a $1.3 billion reduction in the total debt as well as other terms.

Young was appointed last year to supervise the finances and operation of the sewer system on behalf of Bank of New York Mellon, the trustees for the creditors, who include JP Morgan Chase.

(Reporting by Melinda Dickinson; Writing by Matthew Bigg, Editing by Tom Brown and Kenneth Barry)