UPDATE 2-Quiksilver enters into loan agreement with Rhone

* Enters into 5 yr loan agreement with Rhone

* To use proceeds to pay down debt

* Q2 adj. EPS $0.05 lags est $0.06

* Gross margins fall in Q2 hurt by inventory reduction

* Shares fall 18 percent

(Adds conference call details)

June 8 (Reuters) - Apparel maker Quiksilver Inc (ZQK.N) said it agreed with private equity firm Rhone to take a 5-year loan of about $150 million to improve its liquidity position, and posted an adjusted quarterly profit that lagged market estimates by a cent, hurt by lower gross margins.

Quiksilver said it will eliminate 160 positions at the end of July as part of the final phase of a T-shirt production facility closure and distribution center consolidation, a company executive said on a conference call with analysts.

The company said it was targeting substantial cost reductions by the end of this fiscal year and expects earnings to be in the low-single-digit range in the third quarter. It sees third-quarter revenue falling in the mid-teens on a percentage basis compared with the year-ago quarter.

It also continues to look for opportunities to close under-performing stores.

Rhone will also receive detachable warrants with the right to buy about 20 percent of the future outstanding shares of Quiksilver's stock at a price of $1.86.

Shares of the Huntington Beach, California-based company were trading down 52 cents at $3.10 after the bell. They closed at $3.62 Monday on the New York Stock Exchange.

Quiksilver will classify about $82 million of the loan as debt and $68 million as equity, the executive said.

The company will appoint two new directors designated by Rhone to its board, and use the proceeds from the senior secured term loan to pay down debt.

Quiksilver also entered into a written commitment with Bank of America and GE Capital, as joint lead arrangers, to refinance its existing Americas facility in the form of a new 3-year $200 million asset-based credit facility.

The company was also working to refinance its European debt into a fully committed multi-year facility that carries set interest rates and terms, the executive said.