BURLINGTON, Vt. – A new report by investment banker Morgan Stanley & Co. raises concerns about the cash flow of a North Carolina company trying to buy Verizon Communications’ landline and broadband service in northern New England.

FairPoint Communications’ “expectation that it will not be able to generate enough cash to pay its current dividend without the proposed merger with Verizon suggests that the company is in a vulnerable position,” the report said.

Union officials, who are against the sale, have raised concerns about FairPoint’s finances as a reason for rejecting the proposed $2.7 billion deal.

The deal must be approved by Vermont’s Public Service Board and regulators in New Hampshire and Maine. If any of the states reject the deal, it will not go through, and FairPoint will lose as much as $55.8 million, the report said.

“We are concerned that FairPoint may be in a position where the Verizon NE lines transaction has become a necessity for the stock rather than an option,” the report said.

Walter Leach, FairPoint’s executive vice president for corporate development, said Wednesday that the company’s ability to pay its dividend is not relevant to the proposed Verizon deal.

“This analysis was based on what the company looks like if the merger doesn’t occur,” he said.

The company’s financial status “continues to be a focal point” in deciding whether FairPoint is the best choice to replace Verizon, said Vermont Public Service Commissioner David O’Brien.

“We consider the financial capacity and ability of FairPoint, as an acquiring company, to be a very important – if not the most important – consideration,” he said. “We are looking at it very, very closely.”

State Sen. Vincent Illuzzi, R-Essex/Orleans, who has raised doubts about FairPoint’s finances, said the report suggests the company does not have the wherewithal to help Vermont reach its goal of providing high-speed Internet access to all residents.

“We don’t want to give it to a company that is going to struggle to meet the demands of its consumers and its shareholders,” Illuzzi said.