By now (if you wanted to or not) you have heard about Kovalchuk signing his insanely long 17 year 102 million dollar contract, which was denied today by the NHL deputy commissioner Bill Daly:
“The contract has been rejected by the League as a circumvention of the Collective Bargaining Agreement. Under the CBA, the contract rejection triggers a number of possible next steps that may be elected by any or each of the NHLPA, the Player and/or the Club. In the interim, the player is not entitled to play under the contract, nor is he entitled to any of the rights and benefits that are provided for thereunder. The League will have no further comment on this matter pending further developments.”
More information can be found in the CBA, section 26.3 titled “Circumventions”
Basically the league is saying that because NHL contracts are averaged out (ex. a 25million contract/5years = 5million a season) that a contract of 102million over 17years breaks down to less cap hit each year then a contract of a 102million over 10years, giving (in this case) the Devils more spending money each year. While it is in the Devils power to give out 17year contracts the problem is that Kovalchuk is 27 meaning (27+17) Kovalchuk would be 44 when his contract expires and the likely hood that he can continue to play at that age is very slim.
Now the Devils will probably have front loaded the contract (meaning the next X amount of years they pay Y amount more then in the last few years) but the cap hit there still become reasonably less in a long term deal.
For Example1: 102million over 17years
If you average that contract out you would pay him 6million dollars a year over the course of the 17years.
You could front load that contract, for example, to pay him 8.5million a season for the next 10seasons (until he is 37) and have paid him 85million and then lower that for the last 7years. even though he would probably retire with some money left on the table (at that point it wouldn’t really matter), it’s all about the cap hit.
There are a few different ways they could spread this out (depending on cap space) such as 10mil the first 2season then drop to 8.5 or another number but it gives flexibility to the team, I just used 1number as an example.
Example2: 102million over 10years
If you average that contract out you would have to pay 10.2million dollars a year over the course of 10years.
You have to pay more each season (10.2 million) with practically no flexibility (there is a cap on how much 1 player can make each year.)
You don’t get the same flexibility as Example1 which is why people view Example1 as a loop hole in the CBA.
The league felt the Devils exploited this loop hole and thus rejected the contract.
But has Kovalchuk and his camp done something that other players in the league haven’t?
- The Vancouver Canucks signed Roberto Luongo (31) to a contract extending into the 2021 season. A front loaded contract (the Canucks pay 10million this season) but less then 4 in the last 3 years.
- The Chicago Blackhawks signed Marian Hossa (31) to a contract extending into the 2021 season. The put on an additional 2Million on for 7years (keeping the cap hit manageable) before it drops to 4million then 1million then less then 1million over the last 5years.
Of course you can look all over the league to see GM’s and players taking these types of deals ( how about Franzen and Zetterberg?) but perhaps the one difference between all these players and Kovalchuk is the length of the contract.
But we have seen contracts extending past 12years (DiPietro has a 15year deals) although he signed that at a young age and his contract is actually averaged out over the number of years offered (he makes the same amount at the last year of his contract as he did at the first year.)
Or perhaps it somehow doesn’t “feel” right (we’ve seen players in their 40’s before Chris Chelios, Mark Messier, Ed Belfore, and Dominik Hasek are a few) so who is to judge that Kovalchuk isn’t a name to one day be on that list?
But is it that much different then the contracts listed above?
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Filed under: NHL, Signings | Tagged: Kovalchuk, NHL, Signings | 1 Comment »