Front Loaded Contracts

Discussion in 'The Business of Hockey' started by Sansbacon, Jul 2, 2007.

  1. Sansbacon

    Sansbacon Sansagoodhockeyteam

    Joined:
    Sep 26, 2006
    Messages:
    2,537
    Likes Received:
    210
    Trophy Points:
    111
    Gender:
    Male
    Location:
    Scarsdale, NY
    Does anyone have a link with info on how these contracts affect the salary cap from year to year?

    For example, Briere's contract being front loaded for 10 million in the first season. Now does that 10 million count for 1/5 of Phillys cap, or does the average of 6.5 only count?

    Thanks.
     
  2. bullocks

    bullocks Registered User

    Joined:
    Jun 26, 2007
    Messages:
    5,773
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    Toronto
    average.
     
  3. Sansbacon

    Sansbacon Sansagoodhockeyteam

    Joined:
    Sep 26, 2006
    Messages:
    2,537
    Likes Received:
    210
    Trophy Points:
    111
    Gender:
    Male
    Location:
    Scarsdale, NY
    Link?

    I searched. (Obviously not well enough.)
     
  4. Irish Blues

    Irish Blues Still on hiatus

    Joined:
    Dec 15, 2002
    Messages:
    21,801
    Likes Received:
    1
    Trophy Points:
    169
    Occupation:
    Actuary
    Do you understand how the cap number for a player is calculated?
     
  5. Sansbacon

    Sansbacon Sansagoodhockeyteam

    Joined:
    Sep 26, 2006
    Messages:
    2,537
    Likes Received:
    210
    Trophy Points:
    111
    Gender:
    Male
    Location:
    Scarsdale, NY
    I'm arguing with a few kids whether or not a front loaded contract affects the teams entire cap space for each year. I'm saying it's the average, they are saying the opposite. I'm just trying to find a link to send them.
     
  6. JerseyMike

    JerseyMike Registered User

    Joined:
    Feb 24, 2007
    Messages:
    507
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    Toronto
    I keep hearing how these front loaded contracts can help big market teams.....That's something I have yet to understand.
     
  7. God Bless Mr Coffee

    God Bless Mr Coffee Ah, I think there were braver deeds.

    Joined:
    Jul 11, 2006
    Messages:
    8,504
    Likes Received:
    2,045
    Trophy Points:
    156
    Occupation:
    unemployed shortstop
    Simple. The Flyers could have made the Briere deal pay $45 million in the first year and then $1 million per for the last 7. Same cap hit. But not many teams in the league could afford to do that.
     
  8. SJeasy

    SJeasy Registered User

    Joined:
    Feb 3, 2005
    Messages:
    12,538
    Likes Received:
    1
    Trophy Points:
    0
    Occupation:
    disabled
    Location:
    San Jose
    Frontloading actually gives the player a bit more than average value of the contract. The bigger payments "earn more interest" over time than a contract that is paid evenly over a duration of several years. Briere mentioned it in his TSN interview and apparently it is referred to as AAV (actual average value) by players and agents. It is an advantage to teams that are more liquid.
     
  9. Levizk

    Levizk Registered User

    Joined:
    Feb 12, 2007
    Messages:
    2,691
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    Monroeville, PA
    Not true there's a limit on how much a player's pay can decrease each season, I think it's 50% maximum or something like that. The principle that a team can have like a 90 million dollar salary for a year while still being in the cap range is the general idea though.
     
  10. The HW

    The HW Registered User

    Joined:
    Jan 27, 2005
    Messages:
    353
    Likes Received:
    0
    Trophy Points:
    0
    Is there any risk to a player (like Briere) who is in Year 1 of a heavily-frontloaded deal if they get their escrow money clawed back?

    Maybe I'm not asking this clearly... but is the escrow money they have to set aside also based on an average cap hit or do front-loaded contracts skew these payments? Thanks.
     
  11. Jaded-Fan

    Jaded-Fan Registered User

    Joined:
    Mar 18, 2004
    Messages:
    43,762
    Likes Received:
    2,966
    Trophy Points:
    186
    The only real advantage that I can see is that is a player is making relatively little (say $3.5 million) at the end of their 8 year deal, but is still a large cap hit (say $7 million to keep to the 50% rule) the player may be easier to unload to a sucky team who has a good deal of cap space. Say $7 mil. schmo + a 1st and 2nd rd. pick for $500,000 schmo and a 7th rd. pick. You have that kind of option in theory. But the cap hit itself remains the same throughout the contract. Hopefully, IB will answer if this is true, as he knows the cap inside and out.
     
  12. Irish Blues

    Irish Blues Still on hiatus

    Joined:
    Dec 15, 2002
    Messages:
    21,801
    Likes Received:
    1
    Trophy Points:
    169
    Occupation:
    Actuary
    Tell them to go read Article 50.5(d)(ii) in the CBA. The proper name for the cap number is "Averaged Amount" - hence, it would be an average of the salaries over the life of the contract.

    Jaded-Fan is correct about a possible advantage ... though we'll see how many teams need to pick up a huge salary to be cap compliant in a few years.
     
  13. Fugu

    Fugu Guest

    Here's another one to ponder. Let's use Briere as the example.

    Cap hit: $6.5 MM
    Term: 8 yrs
    Breakdown per year: $10, 8, 8, 7, 7, 7, 3, and 2

    The Flyers will have a cap hit of $6.5 MM for the next 8 yrs.... OR...until they trade Briere..... OR...... until they buy him out.

    If they buy him out after 6 yrs, the buyout clause says that the cap hit will be the 2/3rds the residual amount of the contract spread out over 2x the residual term. That would mean $5 MM x 2/3 divided by 4 yrs, or not even $1 MM per year? If his play is slipping, why wouldn't they buy him out take and take a much smaller cap hit?

    What did I miss?
     
  14. The HW

    The HW Registered User

    Joined:
    Jan 27, 2005
    Messages:
    353
    Likes Received:
    0
    Trophy Points:
    0
    Briere has a no-movement clause, so he'd have to agree to being waived and bought out.
     
  15. stazza18

    stazza18 Registered User

    Joined:
    Jul 14, 2005
    Messages:
    1,484
    Likes Received:
    2
    Trophy Points:
    96
    He can be bought out at any time. He can't be waived. I'm sure IB has the clause.
     
  16. Fugu

    Fugu Guest

    Irrelevant to the thought exercise in process. Just go with it as I was only using Briere's numbers as an example.

    And I don't think an NMC would cover a buy out, but I'll wait for one of our legal dudes to pop in and clear it up.
     
  17. SJeasy

    SJeasy Registered User

    Joined:
    Feb 3, 2005
    Messages:
    12,538
    Likes Received:
    1
    Trophy Points:
    0
    Occupation:
    disabled
    Location:
    San Jose
    Originally Posted by CBA Article 11.8
    11.8 Individually Negotiated Limitations on Player Movement.

    (a) The SPC of any Player who is a Group 3 Unrestricted Free Agent under
    Article 10.1(a) may contain a no-Trade or a no-move clause. SPCs containing a no-Trade
    or a no-move clause may be entered into prior to the time that the Player is a Group 3
    Unrestricted Free Agent so long as the SPC containing the no-Trade or no-move clause
    extends through and does not become effective until the time that the Player qualifies for
    Group 3 Unrestricted Free Agency. If the Player is Traded or claimed on Waivers prior
    to the no-Trade or no-move clause taking effect, the clause does not bind the acquiring
    Club. An acquiring Club may agree to continue to be bound by the no-Trade or no-move
    clause, which agreement shall be evidenced in writing to the Player, Central Registry and
    the NHLPA, in accordance with Exhibit 3 hereof.

    (b) A no-move clause may prevent the involuntary relocation of a Player,
    whether by Trade, Loan or Waiver claim. A no-move clause, however, may not restrict
    the Club's buy-out and termination rights as set forth in this Agreement.
    Prior to
    exercising its Ordinary Course Buy-Out rights pursuant to Paragraph 13 of the SPC
    hereof, the Club shall, in writing in accordance with the notice provisions in Exhibit 3
    hereof, provide the Player with the option of electing to be placed on Waivers. The
    Player will have twenty-four (24) hours from the time he receives such notice to accept or
    reject that option at his sole discretion, and shall so inform the Club in writing, in
    accordance with the notice provisions in Exhibit 3 hereof, within such twenty-four (24)
    hour period. If the Player does not timely accept or reject that option, it will be deemed
    rejected.

    Say thanks to KDB.
     
  18. kdb209

    kdb209 Registered User

    Joined:
    Jan 26, 2005
    Messages:
    16,271
    Likes Received:
    5
    Trophy Points:
    126

    I already covered this in the Briere thread on the main Free Agent forum. The actual dollars of the buyout are small and simple ($833K/yr for 4 years), but the cap hit is not ( $4.33M, $5.33M, $833K, $833K).

     
  19. Irish Blues

    Irish Blues Still on hiatus

    Joined:
    Dec 15, 2002
    Messages:
    21,801
    Likes Received:
    1
    Trophy Points:
    169
    Occupation:
    Actuary
    I did a little research ... it starts at $10 million and drops by $1 million every year until the end of the contract.

    ;) I'll let you crunch the numbers again.
     
  20. puck57

    puck57 Registered User

    Joined:
    Dec 21, 2004
    Messages:
    2,261
    Likes Received:
    0
    Trophy Points:
    0
    If I was a gm, I would not go more than 3 or 4 years with about 95% of players- except of course obviously Crosby or Oveckin or maybe Malkin. To me it is way too much of a gamble with the cap to be stuck with an 8 or 10 year contract and then if you try to unload the contract after say 5 years or something- you could really be stuck.
     
  21. Fugu

    Fugu Guest


    So what is the disadvantage to front-loading?
     
  22. Fugu

    Fugu Guest



    Also thanks, kdb. Whoever came up with that formula is a sadistic narcissist.

    I generally avoid the General Discussion board. My head starts hurting after 2 or 3 posts, and then I get really grumpy.
     
  23. Fugu

    Fugu Guest

    And IB? No, I am not going to read the entire CBA until I'm paid to do it. (Since I don't see that happening, I guess I'll have to find some other reading material for my next plane ride.)
     
  24. Valhoun*

    Valhoun* Guest

    That is the advantage. There will always be plenty of teams with self-imposed salary caps that are much lower than the real cap. With front loaded contracts it makes it much easier to dump players on teams like this since the actual value of the contract that must be paid by the new team is virtually nothing despite the cap hit being much higher.

    Also, NMCs most certainly do not restrict teams from buying out salaries.

    Also, No trade clauses in general don't seem to stop teams from trading players. They just stop teams from trading players to really horrid teams.
     
  25. puck57

    puck57 Registered User

    Joined:
    Dec 21, 2004
    Messages:
    2,261
    Likes Received:
    0
    Trophy Points:
    0
    Yea, but the team getting the player still has to take the cap hit which restricts the new team from other options and trades or am I missing something. I realize the money would be less to have to pay out but you still have the cap hit. In the pre-lockout league I could see this logic but not now with the cap.
     

Share This Page

monitoring_string = "358c248ada348a047a4b9bb27a146148"