NEW YORK (AP) - Blackstone Group LP will spend as much as $930 million for GSO Capital Partners LP, a hedge fund that helps finance private equity buyouts and manages debt investments, the New York-based private equity firm said yesterday.

Blackstone CEO Stephen Schwarzman said the combination of GSO's businesses with Blackstone's debt operations creates one of the largest credit platforms in the alternative asset management business, at a time when credit markets have closed up.

Combined, they will have more than $21 billion of total assets under management. About $10 billion of that comes from GSO.

"It positions us especially well strategically within the credit markets," Mr. Schwarzman told investors on a conference call. "As a firm, we've been growing the credit business for the last several years, and we think now is a fantastic time to be growing this business globally."

The downturn in the housing market and problems with sub-prime loans led credit markets into turmoil in late summer, making it more expensive for private equity firms to finance buyout deals. Blackstone executives said buying GSO would expand a part of its business that will do well in the current environment.

Blackstone will pay $620 million up front in cash and stock, and up to an additional $310 million over the next five years based on certain earnings targets.

Blackstone's board also approved $500 million in share repurchases, in part to offset the issuance of new stock for the GSO acquisition.

GSO specialises in leveraged finance, and manages a $4 billion multi-strategy credit hedge fund, a $1 billion mezzanine fund, a senior debt fund and various collateralised loan obligation vehicles. It has about 130 employees around the world, with roughly a third of them in offices in New York, London, Los Angeles and Houston.

It was founded about two-and-a-half years ago by former Credit Suisse executive Bennett Goodman along with Doug Ostrover and Tripp Smith. The three will join Blackstone to manage the combined businesses, with Mr. Goodman getting a seat on Blackstone's executive committee.

Based on Wednesday's closing price of $18.10, Blackstone would be able to repurchase up about 27.6 million shares of outstanding stock.

Shares rose $1.07, or six percent, to $19.17 midafternoon yesterday.

Blackstone went public in June in what became the sixth-richest initial public offering in US history. The firm's market value soared on opening day, with shares rising 13 percent to close at $35.06, but have tumbled 45 percent since then.