The publisher of the Los Angeles Times, part of The Tribune Company, has issued an internal memo saying that the newspaper’s cash flow dropped 27% during that last quarter, according to Bloomberg. The paper is the largest in the company’s chain.

Based on figures put out earlier by the Tribune,  ad sales could be off as much as 10% for the quarter.

Sam Zell has put together a deal valued at $8.2 billion to take the company public. The deal is highly leveraged so that any drop in cash flow would make that firm’s ability to keep up with debt service more uncertain.

Zell is bound to look at forecasts for the third quarter to see if the situation is getting worse with time.

If so, the deal could easily die.

Douglas A. McIntyre