BIRMINGHAM, Ala., Nov 11 (Reuters) - The indebted sewer system at the center of Alabama's Jefferson County's bankruptcy is drawing early interest from Wall Street firms and could be bought once it sheds its debt burden, an investor whose company runs the pension fund of state employees said.

David Bronner, the CEO of the $29 billion Retirement Systems of Alabama, said several Wall Street firms called him to inquire about buying the system, one day after the county filed for bankruptcy in the biggest municipal bankruptcy in U.S. history.

They called Bronner seeking advice given his expertise in the system's finances, he said.

Bronner, who is best known for buying a big stake in US Airways Group and briefly becoming its chairman in 2003, himself talked about buying the sewer system in 2008, only to have his overtures rebuffed by county commissioners.

He said the sewer system generates over a $100 million a year in revenue even though it is crippled by a $3.14 billion debt that played a critical role in the decision to file for bankruptcy.

"I have had three or four calls from Wall Street. At this stage, it is investment bankers. They are always looking for a deal," Bronner told Reuters on Thursday.

"Anything that goes into bankruptcy that has a large revenue (stream) is attractive (and) if you remove the debt it is a viable institution," he said.

"There will be other people who look at it and will buy it. They will see if they can flip it in two or three years. It depends on the debt," Bronner added.

Jefferson County's decision to file for bankruptcy on Wednesday followed a three-and-a-half year struggle to avoid filing for Chapter 9.

The decision, which came just when a final deal with creditors looked close, took most observers by surprise but commissioners said they concluded they would never reach a satisfactory deal.

One senior county official rated the sewer system's assets at around $2 billion, despite its debts, and argued that it could be a good buy at anything less than $1.6 billion.

NOT FOR SALE - YET

The system is not currently up for sale.

The county will present a plan to creditors for a settlement to its overall financial situation and that will lead to talks that could last a year or more.

Talks that ultimately broke down this week on settling the debt did, however, include a proposal that could have led to the sewer system's ultimate sale.

Under a framework deal in September, Alabama's state legislature would have been asked to approve the establishment of an independent public corporation, called a Governmental Utility Services Corporation (GUSC), that would have taken control of the system.

State Governor Robert Bentley did not call the special session of Alabama's legislature needed to ratify the GUSC and in the end the deal fell through.

The reason for the GUSC arrangement was to enable Jefferson County to raise new debt to refurbish its sewer system in a market leery of issuing bonds to a county that has become a byword for bond trouble.

But a GUSC could also have paved the way for sale, one county official said.

Because of the extreme political sensitivity of the issue, it is unclear whether county commissioners would support the eventual sale of the system, in large part due to suspicion that any buyer would simply raise already sky-high sewer rates.

Asked whether the county would sanction a sale of the sewer system, commissioner Joe Knight said: "Could we? Maybe. Would we? Probably not, not at this point in time."

But he added it would depend on the advice of bankruptcy attorneys.

(Reporting by Matthew Bigg; Additional reporting by Verna Gates)

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