Speculation: Guess the AAV of the pending Draisaitl deal

[5 Mins 4 Ftg]

 

[Mr Positive]

Typical NHL. Leave open a loophole on something as critical as AAV (LTIR, deferred money). Let teams exploit these loopholes repeatedly with each one incrementally creeping closer to the absurd until one team crosses the arbitrary line. Then the league comes down hard on only that one team.

How is it circumvention? Players usually want front loaded deals to get more money earlier. That matters because of investing. So Jarvis has to wait a long time to get a big chunk of his cash.

It's actually kinder to the poorer teams. What really is an assault to the poor teams is front loading such as having massive signing bonuses. This deferral spreads out the pain

 

[Frank the Tank]

How is it circumvention? Players usually want front loaded deals to get more money earlier. That matters because of investing. So Jarvis has to wait a long time to get a big chunk of his cash.

It's actually kinder to the poorer teams. What really is an assault to the poor teams is front loading such as having massive signing bonuses.

I never called it circumvention. I'm just pointing out how the NHL has handled these "loopholes" in the past (e.g., singling out the Devils for the Kovalchuk contract).

 

[Mr Positive]

I never called it circumvention. I'm just pointing out how the NHL has handled these "loopholes" in the past (e.g., singling out the Devils for the Kovalchuk contract).

Isn't that different though, in that the idea is that 1 million aav years at the end were intended to be canceled out by retirement? With this deferral the numbers will add up.

I do agree though that the league will probably rush to put some boundaries on this. Could a contract have 3 million aav deferred til the 2030s? That seems like a recipe to have GMs sacrificing the future to an excessive degree, when they won't even be in charge to have to deal with the consequences

Edit: I'd also add that maybe Drai isn't interested in a lot of deffered salary. Any cash he has to wait for past retirement gets eroded by inflation. Players want their cash ASAP

 

[TopShelfGloveSide]

pretty crazy that’s allowed

 

[Tobias Kahun]

The bonus in the 9th year should count as dead cap in year 9.

 

[McDoused]

This makes sense.

For example if Draisaitl signed a defferred contract for a total of 116M with aav of 13.5M, that would be 8M in bonuses that wouldn't be paid until the 9th year.

8M with a 5% increase each year would equal 10.27M in year 9. So the player would essentially forfeit 2.27M if you compared to if it was paid up front.

Having said that, I'm not sure that's a fair comparison because it's a compromise between the two sides and basically treated as an extra year (which wouldn't be front load anyways).

Conversely 116M on a regular 8 year contract would be 14.5M aav.

 

[Tobias Kahun]

This makes sense.

For example if Draisaitl signed a defferred contract for a total of 116M with aav of 13.5M, that would be 8M in bonuses that wouldn't be paid until the 9th year.

8M with a 5% increase each year would equal 10.27M in year 9. So the player would essentially forfeit 2.27M if you compared to if it was paid up front.

Having said that, I'm not sure that's a fair comparison because it's a compromise between the two sides and basically treated as an extra year (which wouldn't be front load anyways).

It should still count against the cap

 

[McDoused]

It should still count against the cap

Yeah it's interesting that puckpedia has him with a 60M x 8 year contract for a 7.5M aav contract.

"Because that payment is technically scheduled for Year 9 of the eight-year deal, there is no Year 9 cap charge for the Hurricanes, and the cap hit for the Hurricanes over the course of the eight-year deal is charged on what is actually paid out during that time."

Not sure how the CBA allows for the extra 3.2M in the 9th year not to count in the 9th year.

You have to think the NHL hits them with a cap penalty in year 9. Even if that's the case, it's still beneficial for the Oilers.

 

[TopShelfGloveSide]

Oilers should be alllll over this.

 

[Tobias Kahun]

Oilers should be alllll over this.

Also takes a player wanting to delay money

 

[TopShelfGloveSide]

Also takes a player wanting to delay money

A delay is more appealing than a discount though.

 

[brentashton]

The bonus in the 9th year should count as dead cap in year 9.

I assuming it does. I can’t see how else it would be accounted for under the salaries and revenue formula.

 

[CantHaveTkachev]

I wonder if they heavily front-load the contract so he gets most of his money in the first 4-5 years, then the money he defers is a smaller amount at the end, where he "saves" 500k on the cap

 

[Fourier]

I never called it circumvention. I'm just pointing out how the NHL has handled these "loopholes" in the past (e.g., singling out the Devils for the Kovalchuk contract).

This is different than those front loaded deals. Those deals were structured to lower the cap using tag-on years that the player would never play. The money in these deals will be paid. It is just deferred. Teams are actually being hit with the full value of the money they are spending in today's dollars. That is if the Oilers agree to give Draisaitl $1M ten years from now, the Oilers are charged the equivalent of the present value of that $1M on the cap despite the fact that Draisaitl won't get any of it until 10 years from now. IT's also a good time for this move from the team's perspective as current high interest rates drop the present value of the money more than they would have a few years ago.

These are complex contracts that will require a sophisticated player to understand what they are getting. The good news for the Oilers is that both Leon and McDavid seem very sophisticated in term of the business side and both have enough of a nest egg that deferral will not impact there life style one iota.

 

[Soundwave]

You'd be stupid to not jump all over this. Who cares about cap hit in year 9, it's likely once this era is done, the Oilers are looking at a 3-4 year rebuild minimum anyway against a cap that will probably be $110+ million.

 

[Fourier]

You'd be stupid to not jump all over this. Who cares about cap hit in year 9, it's likely once this era is done, the Oilers are looking at a 3-4 year rebuild minimum anyway against a cap that will probably be $110+ million.

There is no cap hit in year 10. The cap is all included in the original deal. But it is lower because the money is counted at the present value.

 

[Soundwave]

There is no cap hit in year 10. The cap is all included in the original deal. But it is lower because the money is counted at the present value.

Yeah saw that on the main board. If you can get Draisaitl and McDavid to sign off on this, you'd be crazy not to do it.

 

[oobga]

Thinking 13.5 and McDavid does 14-14.5 next summer. Perfectly fine with both.

Fingers crossed for some nice cap bumps in the coming years!

 

[Soundwave]

The funny thing about the Shohei Ohtani contract was I was thinking "man it's too bad you can't do that in the NHL", not realizing you actually can do something like that, lol.

 

[AddyTheWrath]

Can you not just defer all the money to the 9th year? Leon we'll give you a $200M contract but you get all your money after your contract is up.

 

[Frank the Tank]

This is different than those front loaded deals. Those deals were structured to lower the cap using tag-on years that the player would never play. The money in these deals will be paid. It is just deferred. Teams are actually being hit with the full value of the money they are spending in today's dollars. That is if the Oilers agree to give Draisaitl $1M ten years from now, the Oilers are charged the equivalent of the present value of that $1M on the cap despite the fact that Draisaitl won't get any of it until 10 years from now. IT's also a good time for this move from the team's perspective as current high interest rates drop the present value of the money more than they would have a few years ago.

These are complex contracts that will require a sophisticated player to understand what they are getting. The good news for the Oilers is that both Leon and McDavid seem very sophisticated in term of the business side and both have enough of a nest egg that deferral will not impact there life style one iota.

I was more commenting on how the Blackhawks used the same strategy to lower the cap hits of Keith and Hossa before the league slammed the door on the Devils and Kovalchuk.

That being said, I agree that I hope the Oilers and Draisaitl/McDavid benefit from this new precedent being set by Carolina.

 

[brentashton]

Can you not just defer all the money to the 9th year? Leon we'll give you a $200M contract but you get all your money after your contract is up.

There has to be a condition that any deferred money counts against the salary cap (50%of HRR) at some point. It would be counterintuitive to believe otherwise. Otherwise that’s a loophole bigger than the LTIR fiasco for the owners to drive their cars through.

Someone earlier posited that it becomes like dead cap in the 9th year. That seems like a likely scenario.

 

[TheNumber4]

If JJ and Bowman don’t do this deferred payment cap f***ery I would consider it a huge fail when it comes to be “best in class”.

f***in get it done Jackson. Then do the same for McDavid and Bouchard. The solution to all our problems is staring us right in the face! Do it before the NHL closes the loop hole.

 

[kevy9999]

What so funny?
They might not even sign him until closer to playoffs or even let him play in playoffs as a pending UFA. Draisaitl with a NMC holds all the cards.

Nope. You don't want to mess around with this. If drai and bowman are serious about this then they get it out of the way in next few weeks.