Common Misconception About Buried Contracts

As July is well underway and August is peaking around the corner, contract signatures are just slowly trickling in. Or so it seems after a busy first day, first week of free agents, both restricted and unrestricted, putting pen to paper with NHL teams. And as teams sign contracts, their salary cap hit, their payroll is climbing. For teams who can spend to the the upper limit, it has been set to $81.5 million for next season while no teams can have a combined cap hit below the $60.2 million mark.

Fans and media alike love to keep track of their favourite team’s cap situation and thankfully for them, there’s an amazing website which allows them to have this information at their fingertips. And that is only one of the tools CapFriendly.com provides professional journalists, bloggers and fans a solution to this ever complex beast: the calculations and details of everyone’s contract as well as the impact on their respective teams and other players in the league.

Because of its complexity, mistakes or misconceptions are rather frequent. One that we’ve been reading and hearing a lot lately is how much cap space teams still have available and how they can address their issues. It seems like more than a few people think that by sending a player down to the AHL, his salary disappears from his team’s cap hit. Not so fast… But before we get into that, here are a few different important terms to understand.

One-way contracts

Means that the player will be making the same salary if he plays either in the NHL or in the AHL.

Two-way contracts

Means that the player will be making a certain amount in the NHL and a lesser amount if he’s sent down.

No-Movement Clause

Player protection as the team cannot trade them or send them to the AHL (or placed on waivers) without their consent. While the player’s contract is not protected against a buy-out, teams must protect them for the expansion Draft.

No-Trade Clause

Self-explanatory, teams can’t trade him but they can send him down, put him on waivers. Teams can, but don’t have to protect those players for the expansion Draft.

Limited No-Trade Clause

Like a NTC, but has it’s limitations already negotiated and agreed to. Example, a player can have, for limitation, that he has to submit a list of a pre-agreed number of teams he cannot be traded to. He can be traded to the other teams.

Buried Contract

Sending a player down to save cap space has been, in the past, a way for teams to fix their contractual mistakes. It’s called burying a contract and in order when richer teams were “burying” their unproductive big salaries in the AHL to clear cap space. The New York Rangers did it with Wade Redden and the Montreal Canadiens did it with Scott Gomez. Many teams simply cannot afford to bury contracts so it was an unfair practice.

Karl Alzner?

But wait. Teams can no longer do it as the NHL changed the rules. Teams no longer receive full cap relief when a player on a one-way NHL contract is sent to the AHL or loaned to a team in another professional league. The cap hit relief is equal to the minimum salary for that particular season plus $375,000. So here’s the breakdown per season:

  • 2019-20: $700,000 + $375,000 = $1,075,000
  • 2020-21: $700,000 + $375,000 = $1,075,000
  • 2021-22: $750,000 + $375,000 = $1,125,000

This is what it would look like for two often mentioned Canadiens’ players:

2019-20 Cap HitSavingsHabs’ Cap Hit
Dale Weise$2.35M$1.o75M=$1.275M
Karl Alzner$4.625M$1.075M=$3.55M
TOTAL:$6.975M$2.15M=$4.825M

If both are sent down, the Habs would only save $2.15 million of the $6.975 million combined cap hit between the two. This means that the Canadiens would still have $4.825 million counting against their cap even when they’re in the AHL. The Canadiens’ cap situation counts 24 players with just over $4.8 million available. Have fun. Send players down all you want but if you’re doing it for cap reasons, don’t forget the buried contract rule.

So folks, when you try counting the savings when deciding who to send down, take that into consideration. The most a team will save in 2019-20 will be $1.075 million per player. Go Habs Go!

NHL’s Top-20 Current Worst Contracts

Market. Competition. Desperation. Self-preservation. All factors dictating, justifying and/or describing NHL General Managers’ actions during the summer months, but mostly in the early days of July when free agents hit the market. All of which contributing, in one way or another, in bidding wars bumping up the so-called market value of a player, or players within the same category, numbers used at a later date by other players’ agents in justifying the new bar for their clients in future negotiations. The best General Managers are those who can resist succumbing to the temptation of getting into betting wars, by simply sticking to their plans going in… but “simply” just isn’t that simple as it’s often easier said than done.

The irony of this whole phenomena is that the NHL imposed a hard salary cap in an attempt to stop that process, in a way to protect GMs from… themselves. But as we’ve witnessed over and over again, it hasn’t worked. All it has done is kill GM’s abilities to “fix their mistakes” by trading their bad contracts, making it less exciting for fans as in-season trades are few and far between.

“If you look at history in the NHL, the biggest mistakes are made in early July. Worst contracts, guys who underperform. The biggest mistakes are July first. You have to be careful.” ~ Marc Bergevin

As the July 1st Free Agents’ Frenzy is once again upon us, let’s take a look at the NHL’s current worst contracts. Taken into consideration are factors such as cap hit, production, games played, no trades protection, protection against buyouts (signing bonus), age and number of years remaining to the contract. In order to understand the buyout protection, signing bonuses don’t count in the case of a buyout, only the player’s salary. For example, for every year of his contract, Andrew Ladd’s base salary is $1M. The rest is all signing bonus. So the Islanders would still be left with $4.833M of his $5.5M counting against their cap.

20. Antti Raanta (G) 30 – 12 GP – 2.88 GAA – 0.906 SV%

19. Scott Darling (G) 30 – 8 GP – 3.33 GAA – 0.884 SV%

18. Ryan Johansen (F) 26 – 80 GP – 14G – 64 PTS

17. Brandon Dubinsky (F) 33 – 61 GP – 6 G – 14 PTS

16. Cory Schneider (G) 33 – 26 GP – 3.06 GAA – 0.903 SV%

15. James Neal (F) 31 – 63 GP – 7 G – 19 PTS

14. Justin Abdelkader (F) 32 – 71 GP – 6 G – 19 PTS

13. Erik Johnson (D) 31 – 80 GP – 7 G – 25 PTS

12. Ilya Kovalchuk (F) 36 – 64 GP – 16 G – 34 PTS

11. Bobby Ryan (F) 32 – 78 GP – 15 G – 42 PTS

Keep in mind that with the upcoming expansion draft, only those with No-Trade Clauses (NTC) can be left unprotected for Seattle. A player with a No-Movement Clause (NMC) MUST be protected by their team. This has a huge impact on how bad the contract is considered.

10. David Backes (F) 35 – 70 GP – 7 G – 20 PTS

9. Niklas Hjalmarsson (D) 82 GP – 0 G – 10 PTS

8. Karl Alzner (D) 30 – 9 GP – 0G – 1 PT

7. Corey Perry (F) 34 – 31 GP – 6 G – 19 PTS

6. Ryan Kesler (F) 34 – 60 GP – 5G – 8 PTS

And now down to the nitty-gritty, the five worst contracts in the NHL.

5. Nikita Zaitsev (D) 27 – 81 GP – 3 G – 14 PTS

4. Andrew Ladd (F) 33 – 26 GP – 3 G – 11 PTS

3. Kyle Okposo (F) 31 – 78 GP – 14 G – 29 PTS

2. Loui Eriksson (F) 33 – 81 GP – 11 G – 29 PTS

1. Milan Lucic (F) 31 – 79 GP – 6 G – 20 PTS

With the news that Erik Karlsson just signed a contract extension with the San Jose Sharks giving him a $11.5 million cap hit, we might have to wait a few years but that contract might eventually find its place amongst the NHL’s worst contracts… particularly if he can’t stay healthy. Either way, desperate GMs are likely to fall, as they do every year, to the peer pressure of getting a much desired free agent but as you can see, the notion that teams “get them for free” is as far as it gets from accurate. Here’s hoping that Marc Bergevin doesn’t pull another Alzner. Could Matt Duchene be a good fit? We’ll find out soon enough. Go Habs Go!