Scout urges tim Hortons to boost debt

Scout Capital Management has asked Canadian coffee and doughnut chain Tim Hortons Inc. to alter its u.S. expansion strategy and increase debt levels so it can bolster its capital structure and buy back shares, the u.S. hedge fund said Tuesday. The demands to Tim Hortons’ board by New york-based Scout Capital largely mirror those put forward by rival u.S. hedge fund Highfields Capital earlier this year. In a letter to the board on Tuesday, Scout, which has a 5.5% stake in the company, said the measures would allow Tims, as the company’s patrons call it, to dramatically improve shareholder returns. The fund said it believed Tims could double its free cash flow to $4.50 per share by 2015 and push its stock price into the $90 to $112 range. Scout urged the company to increase its debt to a “moderate level.”