April 22 (Bloomberg) -- Qwest Communications International Inc., the fourth-largest U.S. local-telephone company, turned to some of MCI Inc.'s largest shareholders for financing to raise its offer for the company to $9.75 billion.

Legg Mason Capital Management yesterday said it is among investors putting up $800 million in cash that helped Qwest increase its offer from $8.94 billion. American Express Co. and Leon Cooperman's Omega Advisors Inc. are also among at least five shareholders owning a combined 13 percent of MCI who signed up, people familiar with the matter said.

Chief Executive Richard Notebaert, 57, now has more leverage to press MCI to scrap an agreement to be bought by Verizon Communications Inc., the biggest U.S. local-phone provider. Qwest is offering 30 percent more than Verizon, which may now be forced to raise its $7.51 billion bid or drop the offer. Qwest's move may herald an end to the 10-week battle for MCI, the No. 2 long- distance telephone provider.

``We're reaching the upper end of the numbers,'' said Bruce Allen, president of Bruce G. Allen Investments, which holds MCI shares. ``We're delighted there's a higher offer on the table.''

Denver-based Qwest yesterday said in a letter to MCI directors that its offer of $30 a share is its ``best and final'' bid. Verizon is offering $23.10.

Jeffrey Bukowski, a spokesman for Legg Mason Inc., which owns 1.7 percent of MCI and is also Qwest's second-largest holder, said the company's fund management unit will contribute to Qwest's offer. He declined to elaborate.

Cooperman, chief executive of Omega Advisors, which had 3.7 percent of MCI stock as of April 11, declined to say whether he was among the investors. American Express spokesman Paul Johnson also declined to comment. Qwest spokesman Tyler Gronbach declined to comment on who provided the equity funding.

Shares Rise

Verizon and Qwest are fighting for MCI's 140-nation network and its contracts with large corporations to keep up with SBC Communications Inc., which will be the largest U.S. phone company after closing the $16 billion purchase of AT&T Corp., MCI's biggest rival.

Qwest has debt of $17.3 billion, exceeding its stock-market capitalization of $6.6 billion. Buying MCI, which has about $2 billion of annual cash flow, would help Qwest manage borrowings.

Shares of Ashburn, Virginia-based MCI rose 50 cents, or 1.9 percent, to $27 in extended trading yesterday after the revised bid was disclosed. The stock had risen 23 cents to $26.50 as of 4 p.m. New York time in Nasdaq Stock Market composite trading. Qwest rose 7 cents to $3.61 and New York-based Verizon gained 48 cents to $34.26 on the New York Stock Exchange.

Stake in Company

Qwest's board met yesterday to approve the increased offer, which includes $16 a share in cash and $14 in stock. Verizon's offer is made up of $14.75 in stock and $8.35 in cash.

The $800 million lined up from investors helped Qwest raise its bid from $27.50 a share. In exchange for cash, the shareholders will receive an equity stake in the enlarged company.

Investors agreed not to sell their stakes in the combined company for 45 days after the deal closes to quell concerns by MCI directors over swings in the stock used by Qwest to fund the purchase, the people said. Qwest said in March that it was seeking as much as $2 billion from private investors.

Qwest would repay the money, plus 2 percent annualized interest, should its bid fail, the people said. Banks also have pledged to lend $7.25 billion to help Qwest finance the deal, the company said yesterday in a regulatory filing.

Under Review

Qwest gave MCI a deadline of 5 p.m. New York time on April 23 to decide whether its latest offer is superior to Verizon's.

``We have received the latest revised Qwest offer and our board will review it carefully as it has all previous offers,'' MCI spokesman Peter Lucht said.

Verizon last week filed the proxy statement for its merger with MCI, beginning a 60-to-90 day period before a shareholder vote on the deal. The company bolstered its chances of winning the vote on April 9, when it agreed to buy the 13 percent of MCI's shares held by Carlos Slim, MCI's biggest investor.

``We continue to believe Verizon is the best partner for MCI,'' Verizon said in a statement yesterday.

Verizon's agreement to buy Slim's stake for $25.72 rankled MCI's other shareholders, including Cooperman and Bill Miller of Legg Mason, who said they should get the same amount.

As part of the new offer, Qwest agreed not to walk away from the deal if MCI's cash flow, or earnings before interest, taxes, depreciation and amortization, falls by as much as $25 million more than expected. MCI had wanted protection against a decline of about $300 million, one person said.

To contact the reporter on this story: Dana Cimilluca in New York at dcimilluca@bloomberg.net.

Last Updated: April 22, 2005 00:02 EDT