Arch Coal expects to file for bankruptcy protection within months

* Out-of-court restructuring deal unlikely - sources

* Filing could take place before Dec. 15 bond payment

CHICAGO, Nov 9 (Reuters) - Arch Coal, the second largest coal miner in the United States, said on Monday that it could follow its smaller peers into bankruptcy in the near term, even if current talks with creditors yield a restructuring agreement.

Missouri-based Arch Coal, struggling under strict regulation and plummeting coal prices, reported a $2 billion third-quarter net loss on Monday and said it could have trouble servicing $5.1 billion of debt in a stubbornly challenging environment.

“If an agreement (with creditors) is reached and we pursue a restructuring, it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code,” the company said its results filing with the U.S. Securities and Exchange Commission.

Competitors such as Walter Energy, Alpha Natural Resources and Patriot Coal have all filed for bankruptcy this year.

The likelihood of an out-of-court agreement was remote, sources with knowledge of the restructuring talks said. They said Arch could file for Chapter 11 protection as soon as next month.

Arch ended a proposed debt swap last month, seen as key to delaying the prospects of bankruptcy, after opposition from a group of senior lenders who said that the terms of the deal jeopardized their return.

“Given how hard it has been to negotiate any deal, especially with senior lenders who seem to want control of the company, it is not surprising that Arch will have to file for Chapter 11 soon,” Morningstar analyst Kristoffer Inton said.

The company, which ran into debt trouble after an expensive purchase of International Coal Group during a coal price peak in 2011, has $90 million of coupons due on Dec. 15 and a further $14 million due on Jan. 15, 2016.

The company warned if it files for bankruptcy its stock will likely be worthless and holders of its loans and bonds are unlikely to be repaid in full.

Arch’s term loan was trading at 46.5-47.74 on Monday.

The miner cancelled a conference call that was to follow the third quarter results release. It said difficult conditions in the coal industry would persist throughout 2016.

“Our cash flow (...) is not sufficient to service our debt sustainably in this operating environment,” John Drexler, Arch’s senior vice president and chief financial officer, said in the earnings statement.

If Arch Coal does not file for Chapter 11 protection by Dec. 15, it can choose to miss its bond payment, setting off a 30-day grace period.

It had $704 million of liquidity as of Sept. 30. (Additional reporting by Jessica DiNapoli in New York; editing by Grant McCool)