Covington Development Retains Financial Adviser

Montano Securities Corp., an investment bank that specializes in rescuing foundering public companies, has been retained as a financial adviser by ailing Covington Development Group.

Covington, a 35-year-old home-building company based in Fullerton, has been hit hard by the Southland’s three-year housing market recession.

In a letter to shareholders--copies of which were mailed to newspapers by an anonymous source--Covington’s president, Loran Covington, reiterated that the company’s financial situation is precarious and said that Montano had been hired to help turn things around.

Covington’s letter also disclosed that the company is being ousted from its headquarters building in a foreclosure action and said that the company could be forced into bankruptcy if its largest creditor presses a $4.1-million claim.

Montano Securities’ founder Dan Montano said his company has not taken over the daily operation of Covington--as it does in many of its rescue jobs--but is merely advising company officials.

That advice, he said, has two key ingredients.

“We are telling them to avoid bankruptcy because under the present system there is no guarantee you’ll come out of it once you go in,” he said.

“And we have told them to seek a voluntary universal settlement with creditors, paying them as much as is possible.” Montano said he thinks that is possible “because Covington has been around for 35 years and has a history, until now, of always paying its bills. So the vendors (creditors) know this and know that if they help Covington get through this crisis that the company will be around to buy from them and hire their services when things come back.”

Montano said his review of Covington’s situation shows that its problems “aren’t that they are lousy sailors but that they are caught in a typhoon of unmeasurable magnitude. We have to help them get through the storm.”