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The CBA: Creative Contracts

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NHL GMs are a funny breed, most of them are either highly educated, or former players. They’ve all been around the game for a long time, and have access to all sorts of resources, and information that us fans do not. They have lawyers, accountants, scouting, analytics, trainers, psychologists, and just about everything else a small business owner could never afford, to make their corporation run as smoothly as possible. Yet, somehow, they always manage to do something incredibly stupid, while the rest of us can see the problem with what they just did from miles away. At first, they got the benefit of the doubt. They have all those resources, surely they see something coming that we don’t. After years and years of seeing bad contracts remain bad contracts, and bad trades remain bad trades, they’ve lost all credibility in that department.

In a way, NHL GMs are like Airlines — None of them are good, in fact they’re all terrible. Sometimes one stands out as being really good, but I assure you, every single one of them is on the verge of doing something stupid at any given moment. The one’s you’d rank in the upper echelon, have just gone long enough between incidents to make you believe that they won’t do something stupid. Don’t buy it, it can happen at any moment.

Yesterday, the Oilers did something wonderful. Peter Chiarelli pulled off something of which I didn’t think he was capable. He signed Joel Persson to a one-year contract. The player is fine, he’s young, Swedish — there are no Swedes who are bad at defense — but this really isn’t about the player. This is about the contract. It’s a one-year Entry Level Contract, like any other player entering the league receives. The plan for it though, is pure genius and exactly the kind of thing the Oilers need to be doing.

The Oilers are potentially cap-strapped for the foreseeable future. I say potentially because there are ways around it if they’re creative enough. The defense is locked in for the coming year barring some major trade, so there really isn’t room for a player of Joel Persson’s skill in the coming year. He’s the kind of player who might be a late bloomer and be an asset in the coming years. The Oilers have signed him to a one-year contract, and have already loaned him back to his SEL team.

The way the contract is structured is that his SEL team will pay him for everything beyond his $92,500 signing bonus. Once that contract expires, the Oilers will be able to retain his RFA rights by qualifying him around one million dollars, and negotiate a reasonable contract if he looks like an NHL player by then. That’s it, rights to a player who might be good for the cost of $92K that doesn’t count against the cap. It’s a great way to plant seeds for the future. It’s the equivalent of paying retainer on council, or making a political donation for the tax credit. Either it works in your favor, or you write it off.

Teams with money should be finding creative ways to use their cash around the cap like this all the time. Either structure contracts, or find nice new loopholes like that one. I’ll be honest, I didn’t even think of Persson’s as an option prior to yesterday. The Oilers have as much cash as I have free-time at work — to clarify, I assure you that I don’t do shit at work. The Oilers have no excuse for passing up opportunity for cash.

In light of that wonderful contract, I started looking at some of the other nice ones around the league. Although there ave been lots over the course of time, I’ll specifically look at ones under the current CBA.

Before going any further, it’s important to note that the Cap Hit is the average total salary made per year. The Total Salary is the sum of the Signing Bonus and the Annual salary. The rules in place dictate that there can’t be more than a 35% variance between years, and that the lowest year can be no less than 50% of the highest year. It’s why you don’t see extreme back diving deals like Roberto Luongo’s or Marian Hossa’s anymore. You can read more about some of the restrictions here.

Karl Alzner

The contract Karl Alzner signed with Montreal took a lot of heat last year. Too long, to much money, etc. All those potentially valid criticisms came out. When you look at it though, it’s actually pretty good. I’m not a huge fan of the player, but I have no problem with his contract. 5 years a 4.625M is a bit much for a player of his caliber, but the first two or three years of it could have given the Canadiens decent value if the team were not terrible. By July 1st of 2020, the Candians will have paid him $18.125 Million of his $23.125 five year contract with two years remaining. His cap hit well exceeds his salary in those years. A team like Arizona who likes to reach the cap floor without spending actual cash would absolutely love to trade for those finals two years. I think this contract could have been a bit better, in the creativity, the 4th year could have been the 3.5M year with a 2M signing bonus to be even more attractive to cash-strapped teams. Overall though, it’s a great way to lower a cap hit and get out of it when it becomes a burden.

Patrick Marleau

This is one of my favorite contracts in the league. When Patrick Marleau signed this deal most people thought it was really strange that the Leafs were willing to go three years at $6.25M per year. Then the structure came out and it made a lot more sense. It turns out, that the Leafs didn’t sign him to a 3-year $18.75M contract as the paper says, it’s actually a 2-year $17.5M deal. By July first of that third year, $17.5M of his deal is going to have been paid. The Leafs get to use him for those two years at a $6.25M cap hit prior to Auston Matthews’s extension kicking in when they’ll need that space. I’m not sure if the plan is for Marleau to go on LTIR, or to be traded to Arizona (Yes, I will keep picking on Arizona for this), but Patrick Marleau will not suit up for a single game with the Leafs on that last year. It’s a fantastic way to lower a cap hit.

Ryan O’Reilly

Ryan O’Reilly actually has two contracts that qualify, both of them are extremely favorable to the player than the team. After the most recent lockout, Ryan O’Reilly signed an offer sheet with the Calgary Flames for 2 years at a $5 Million cap hit. The Flames really liked the player and had to try and poach him from Colorado. Now, they wouldn’t have gotten him anyway because Jay Feaster was the Air Transat of GMs, but that has nothing to do with the contract at hand. Under normal circumstance, this would have been a good attempt by Calgary. Because the contract paid $3.5M the first year and $6.5M the second year, Ryan O’Reilly would have to be qualified at $6.5M after the contract ran up, that’s pretty damn good certainty of future money.

On Calgary’s end, the scale for compensation is calculated off of the cap hit, not the salary of either year; Therefore, they made an offer that O’Reilly would have been stupid to turn down, but also protected themselves from giving up anything too serious for submitting the offer sheet. It ended up not mattering much, the Avalanche matched the contract, retained his rights, and then took him to team-elected salary arbitration to retain his rights without submitting that qualifying offer. It did however, lead to the Avalanche being forced to move on from that player. The divorce was imminent from that point on.

This is also a good time to slot in why a Leon Draisaitl bridge-deal could have ended in total disaster. Let’s say we got him at a 2-year 7.25 M, sounds good right? Now let’s say the first year pays him 5.25 and the last year pays 9.25. Would we really want to be taking him to team elected salary arbitration or qualifying him at 9.25M? I’d rather he signed long-term between 7.5 and 8 than the 8.5 he got, but overall, this is better than a bridge disaster.

Ryan O’Reilly’s current contract is also fairly creative from his perspective. He gets a lot of money right away, and it’s almost all signing bonuses. Signing bonuses can’t be bought out, they’re the only truly guaranteed part of a contract. The salary can be bought out and then is only with 66% or 33% guaranteed depending on the player’s age. More about that here. In the end, Buffalo paid a big price to get O’Reilly, paid an even bigger price for his contract, and are now married to him financially. The lesson here is, Ryan O’Reilly always gets what he wants. Except maybe at Tim Hortons.

As you can see, the Oilers should have plenty of ways to get players at a low cap hit, pay them a lot of cash and have zero intention of letting the final years be a problem. They also have the kind of cash to hand out some offer sheets structured like Ryan O’Reilly’s. The league’s less Cash armed teams would have a really hard time matching something like that. It’s about time the Oilers start doing things to their advantage instead of just sitting on their ass handing out long term deals with close to equal contracts to bad players. I’d even be fine with the Kris Russell or Milan Lucic deals at their current length and price had they been structured better. The Joel Persson signing is a ray of sunshine on a cloudy day. It will be interesting to see if it’s a sign of things to come, or if I should go grab my winter jacket. This crucial summer will tell.