The Signing Bonus: Rise Of The Buyout-Proof Contract (A Reprise)
This article was originally published in July of 2016, but seems extremely relevant a year later. Most of the players discussed inside underachieved in their first season, and again we saw signing bonuses handed out like candy this summer. Included at the bottom is an update with new contracts from this offseason.
The life of an NHL agent is tough. As the league continues to tweak (or totally overhaul) their CBA each few seasons, changing contract regulations and offering teams different ways of structuring deals, agents are always trying to find ways to circumvent them and get the best offers for their clients.
With teams becoming more and more willing to use buyouts to rid themselves of the horrible contracts that they sign on July 1st – famously a day of simultaneous excitement and regret – agents around the league needed to find a way to protect their clients from losing out on a third (or sometimes two-thirds) of the salary the sides agreed on.
The most recent buyout window, which lasted from June 15th to 30th, saw a dozen NHL players bought out, including household names like Thomas Vanek and Dennis Seidenberg. While some fans may see this as an opportunity for a player to earn two contracts at the same time – Vanek was signed on by Detroit for $2.6MM on July 1st, more than the $1.5MM he surrendered in his buyout – most take it as a personal slight, an indictment of their play or character. Regardless, agents continue to try and secure guarantees for their clients, instead of leaving the power in the hands of the league’s general managers.
Enter the signing bonus, this summer’s contract-du-jour. All across the league, big name free agents have inked deals that will see them paid almost entirely in signing bonuses, with very little actual salary being given out each season. Take Loui Eriksson for instance:
2016-17 – Salary: $1MM, Bonus: $7MM
2017-18 – Salary: $1MM, Bonus: $7MM
2018-19 – Salary: $1MM, Bonus: $6MM
2019-20 – Salary: $1MM, Bonus: $4MM
2020-21 – Salary: $1MM, Bonus: $3MM
2021-22 – Salary: $3MM, Bonus: $1MM
While Eriksson’s cap-hit sits at $6MM per year, he’ll make more than that in bonuses alone each of the next three seasons. There are a couple of reasons why this would benefit the player.
For one, everyone loves getting a big check rather than a weekly salary – who would turn down a piece of paper with six zeros? As any economist will tell you, money in hand is worth more than money promised to come, and just as teams in other sports are deferring payments for this reason long into the future, having money up front is actually more valuable for the player in question.
It’s in the buyout rules that the contract really holds value though, as – hinted at by the title – these contracts are basically buyout-proof. Under the current CBA, buyouts are calculated by taking two-thirds of the remaining salary owed, not including signing bonuses, and spreading it out over twice the remaining contract length. The new cap hit is determined by subtracting the savings from the average annual value of the deal which includes signing bonuses.
This means that if the Canucks were to want to buy out Eriksson after say, the third year of his new deal, they’ll only be saving $333K of cap hit in 2020-21, an insignificant portion of the $6MM number. That last season of $3MM is a bit better for the Canucks (they would save $2MM of his cap hit), but structuring it this way almost guarantees that Eriksson will collect at least $35MM of his deal – more than 97%. It’s just not worth it to buy him out any sooner than his final year.
Andrew Ladd, Milan Lucic, Kyle Okposo all signed deals heavily impacted by signing bonuses, protecting them against a buyout through all but the very end of their agreements. Even Matt Martin, a career fourth liner secured a $10MM deal that is 65% bonus. He’ll only be collecting $750K in salary in years three and four of the deal.
While this doesn’t necessarily mean trouble for clubs around the league, you can bet the owners and NHLPA will take a look at it when negotiations begin on the new CBA. The current agreement expires in 2022, though the two sides have the option to end it a year earlier.
Just as the league has used cap recapture and contract limits to close loopholes in the past, be sure that if they want to continue to have the option to buyout bad contracts they’ll remove this option from the equation. Creating a rule that would make signing bonuses only be able to hit a certain percentage of each season’s salary would be the easy fix, but expect push-back from the NHLPA.
Even if they do end up closing it, agents will work on another way to get their clients the best possible guarantee; they always seem to be one step ahead of the league.
This summer, signing bonuses have taken off even further. Carey Price‘s eight-year extension with the Montreal Canadiens is over 80% signing bonuses, with the goaltender making a maximum of $2MM in salary per year. A $10.5MM cap hit through age-38 will be impossible to buy out, offering almost no cap savings. The Blackhawks face a similar situation with Brent Seabrook, whose 2015 contract is looking worse and worse, and provides little incentive for a buyout.
Interestingly, the Nashville Predators have continued in their practice of avoiding signing bonuses altogether. After signing Filip Forsberg to a bonus-free deal last summer, both Ryan Johansen and Viktor Arvidsson have taken similar structures in their long-term extensions this year. GM David Poile has taken much of the risk off the table even as he allocated many of his resources to his trio of young forwards. Though they pose little risk of age-decline, all three carry large enough cap hits to really hurt the Predators if they were to take a step backwards in their development. It’s hard to see any deserving a buyout, but the option is still there.
Alexander Radulov may be the biggest example among 2017 unrestricted free agents, as his contract with the Dallas Stars is both front-loaded and filled with signing bonuses. Radulov will earn just $13.25MM in salary over the next five seasons, making it difficult to buy out even as he enters his mid-thirties. For a player who has a relatively short track record of success in the NHL, it may quickly turn into a problem if he starts to feel the draw of father time.
Salary Cap Deep Dive: Montreal Canadiens
Navigating the Salary Cap is probably one of the more important tasks for any general manager to have. Teams that can avert total cap chaos by walking the tightrope of inking players to deals that match their value (or compensate for future value without breaking the bank) remain successful. Those that don’t see struggles and front office changes.
PHR will look at every NHL team and give a thorough look at their cap situation heading into the 2017-18 season. This will focus more on those players who are integral parts of the roster versus those who may find themselves shuttling between the AHL and NHL. All cap figures are courtesy of CapFriendly.
Montreal Canadiens
Current Cap Hit: $66,537,977 (under the $75MM Upper Limit)
Entry-Level Contracts
D Jakub Jerabek (One year remaining, $925K, UFA)
F Artturi Lehkonen (Two years remaining, $839K, RFA)
Lehkonen made a strong first impression after coming over from the Swedish League, earning himself a regular spot in the lineup. As the season progressed, his responsibilities started to increase and he spent some time in Montreal’s top six. He should find himself either on the second or third line to start next season.
The Canadiens beat out a handful of other NHL teams to sign the 26-year-old Jerabek back in May. He’s coming off a strong first season in the KHL with Vityaz Podolsk where he finished fifth in points by a defenseman. With Montreal losing their top three left-shot defenders from last season (Andrei Markov to the KHL, Nathan Beaulieu to Buffalo via trade and Alexei Emelin in the Expansion Draft), there is an opening for him to step in and play right away. If he doesn’t make the opening roster, he has a European Assignment Clause in his contract.
One Year Remaining, Non-Entry-Level
F Phillip Danault ($912K, RFA)
D Brandon Davidson ($1.425MM, RFA)
F Jacob de la Rose ($725K, RFA)
F Ales Hemsky ($1MM, UFA)
F Andreas Martinsen ($675K, UFA)
F Torrey Mitchell ($1.2MM, UFA)
D Joe Morrow ($650K, RFA)
F Tomas Plekanec ($6MM, UFA)
D Mark Streit ($700K, UFA)
Potential Bonuses
Streit: $300K
Plekanec is Montreal’s highest-paid forward in terms of cap hit and is coming off of arguably the worst season of his career. While he is still a serviceable checker, his production dropped from 54 points two years ago to just 28 in 2016-17. Given their lack of depth down the middle, he’ll still be called on to log an important role this coming season. Danault is coming off of a breakout campaign that saw him ascend to the top line. If he can follow that up with a similar effort in 2017-18, he’ll be in line for a significant raise next summer and has arbitration eligibility. Hemsky missed most of last season with hip problems and is looking to rebuild his value on a team that had issues scoring with consistency. Mitchell should be able to hold on to his fourth line role for one more year but will be pushed by de la Rose for playing time while Martinsen will likely slide into a reserve spot.
On the back end, Davidson will enter his first full season with the Canadiens after being acquired near the trade deadline from Edmonton. He didn’t see a lot of action after being acquired and will likely battle with Jerabek for ice time. Streit was recently brought in just before Markov’s departure was made official. While he can’t handle big minutes anymore, he can still contribute offensively and could push for a third pairing/power play specialist role for a year. Morrow is no stranger to head coach Claude Julien and was brought in after Boston didn’t qualify him. He’ll also battle for a spot but could also be waived and sent to AHL Laval to serve as depth.
Summer Predictions: Atlantic Division
The hockey world is at a standstill now that August has rolled around. With all of the arbitration cases now decided and just a few restricted free agents left to sign, players and fans alike are counting the days until training camp starts. While there are still several names in free agency that could still help an NHL club, it seems like many are destined either for professional tryouts or late-summer deals after injuries strike.
So now we’ll get into our summer predictions. Before the start of the year we’ll be releasing a full season preview with projections for each club and the expected playoff teams, but first we’ll ask you to give us your take on how you believe each division will end up. Yesterday we looked at the Metropolitan division, a poll that was handily won by the Pittsburgh Penguins despite them not coming first in the Metro since 2013-14 season. The back-to-back Stanley Cup champs are being chosen by many to three-peat, even after saying goodbye to some former playoff stars like Chris Kunitz and Nick Bonino.
Today, we’ll move to the other Eastern Conference division and take a look at the Atlantic. Choose who you think will win the division this season, and make sure to leave your full prediction for the division standings in the comments. As a proxy for the overall standings, we’ll be sure to publish these results alongside our own PHR rankings in September.
Who will win the Atlantic Division?
-
Tampa Bay Lightning 33% (459)
-
Toronto Maple Leafs 17% (235)
-
Boston Bruins 15% (206)
-
Montreal Canadiens 15% (205)
-
Buffalo Sabres 8% (107)
-
Ottawa Senators 8% (106)
-
Detroit Red Wings 3% (41)
-
Florida Panthers 2% (34)
Total votes: 1,393
[Mobile users click here to vote!]
Joni Ikonen, Ryan Poehling Provide Hope For Center Position
- Center Joni Ikonen is a cause for optimism in Montreal, or so says Grant McCagg of Recrutes. Ikonen’s performance in the recent Summer Showcase was truly head-turning, as the flash he displays on a regular basis is highly intriguing. He also produced enough for fourth-best in the tournament, while looking defensively capable all the while. He finished the tournament with an impressive hat trick in a loss to Sweden. Ryan Poehling, another prospect at the showcase, also played well enough to attract praise. Poehling is less dynamic that Ikonen, but he already has an NHL-ready body and two-way mindset. He, like Ikonen, netted 5 points in 5 games in the brief tournament. The comparisons to Ryan Kesler may be relatively premature, but he seems a solid bet to make an impact. If either, or both, players make the Canadiens roster in the next few seasons, it would go a long way towards alleviating the massive center-ice issues the team has struggled with for at least a decade. Alex Galchenyuk will still likely have to take the reigns for this year, however.
[SOURCE LINK]
Minor Transactions: 8/5/17
It may be August, but hockey transactions are still ongoing. While the major names on the NHL free agent market appear to still be in a holding pattern, AHL teams have begun to fill out their rosters with minor leagues deals. The result has been a recent influx of minor news, both of AHL signings and those with less luck finding a contract in North America signing overseas. Keep track of these moves today right here:
- The EBEL has already made their presence felt this summer more so than ever before with the signings of NHL veterans like Matt Fraser, Ben Walter, and Rob Flick, and now the small Austrian-based league is back at it again. Defenseman Mat Clark has signed on with HC Bolzano for the coming season, the team announced yesterday. Clark, a veteran of nine NHL games with the Anaheim Ducks and over 400 AHL games since turning pro in 2010, is a big addition for the Foxes. Like most North American signings in the EBEL, Clark should step in and compete right away for the title of best player on the team. The big blue liner, a second-round draft pick of the Ducks in 2009, is a dominating stay-at-home threat, but has also contributed some modest offense in the AHL as well.
- If Clark had been able to find a good fit in the AHL for the 2017-18 season, one would think he would have jumped on it. Instead, he decided to take a deal overseas. Dalton Thrower, another defenseman, has chosen a different path. Thrower has signed with Allen Americans of the ECHL for the upcoming campaign. It’s quite the change in direction for Thrower’s career path, as he was not tendered a qualifying offer by the Montreal Canadiens this off-season and goes from an NHL contract to an ECHL contract. A second-round pick of the Habs just five years ago, Thrower has not come close to reaching his lofty expectations, having played almost exclusively in the ECHL since turning pro. However, softening the blow of Thrower losing his NHL connection is a familiar face joining him in Allen. The Americans announced that they have signed both he and his younger brother, Josh Thrower, who aged out of the WHL after last season. The pair are set to dominate the Allen blue line in 2017-18.
- Nolan Zajac is having the opposite fortunes of Thrower, as he’ll jump up a level ahead of next season. The younger brother of New Jersey Devils’ mainstay Travis Zajac, the 25-year-old defenseman has signed an AHL deal with the Lehigh Valley Phantoms. Zajac had signed with the ECHL’s Toledo Walleye out of college last off-season, but after 54 points in 61 games and strong performances on loan to three different AHL teams, he has earned a full-time role at the next level. The former University of Denver standout is a strong skater who has left his mark on the score sheet wherever he has played, Zajac will look to continue to climb through the ranks of pro hockey next season. With a big year in Lehigh Valley, the Philadelphia Flyers’ affiliate, Zajac may just end up with an NHL contract next summer and a possible divisional sibling rivalry down the road.
- The AHL’s Ontario Reign, the affiliate to the Los Angeles Kings, have re-signed two-way forward Sam Herr to a one-year extension. The former Notre Dame winger made his pro debut in 2016-17 with 14 points in 61 regular season games with the Reign and looked his best during the team’s short playoff run. The 24-year-old may not have NHL chops, but is a smart player and hard worker who will surely be able to help Ontario out in the coming season.
More to come…
Andrei Markov Will Play In KHL In 2017-18
Monday: Ak Bars Kazan has announced a two-year deal with Markov.
Thursday: Breaking his own news, Andrei Markov announced on a conference call with reporters that he will play in the KHL in 2017-18. He was willing to sign a one-year deal with the Montreal Canadiens but couldn’t come to an agreement, and had other offers from around the NHL before deciding to head back to Russia. In his own words:
I didn’t see myself with any other NHL team. I didn’t see myself wearing another jersey.
NHL.com correspondent Sergey Demidov reports that it will be Ak Bars Kazan that signs Markov, though he wouldn’t confirm it on the call. It’s likely that he’ll retire having only played for a single NHL team, something that’s hard to find in professional sports these days. He did say he could return to Montreal in a year, though that would be a surprising turn after the team clearly wasn’t ready to meet his asking price this summer. The 38-year old will be able to play in the Olympics next year, which would be his fourth such tournament for Russia.
Markov was clearly upset that he was leaving Montreal, but did say that it was a positive move for his family. Just recently Markov got married and has several children, who can now all move back to Russia together. Earlier this year he brought his young twin boys over from Russia after their mother passed away.
It’s a likely end to what was an outstanding NHL career, with 990 regular season games and 572 points. He obviously could have helped a large group of teams around the league still, but never wanted to play for a different team. Montreal had been the team that gave him his first shot in North America, and it was going to be where he finished his career.
Montreal’s Challenges In Utilizing Their Remaining Cap Space
Defenseman Andrei Markov’s departure from Montreal caught many by surprise, particularly since the team had more than enough cap space to bring him back; even after bringing in Mark Streit, the team has more than $8MM to work with per CapFriendly. While the expectation is that GM Marc Bergevin will look to add a big-ticket player now through the trade market or free agency, that’s something that may be easier said than done.
For starters, Markov was arguably the most prominent player left on the open market. There’s a case to be made that there aren’t any top-four blueliners left in free agency so replacing him that way isn’t going to happen. The Canadiens also need help down the middle but the top unsigned UFAs are players that are pondering retirement at this time in Mike Fisher and Matt Cullen. There are wingers who can still help plenty of teams including Montreal that remain available but that’s one area where their depth is fairly strong.
[Related: Montreal’s Depth Chart at Roster Resource]
As a result, going the trade route seems to be the likeliest way to go. However, there are some restrictions there as well. First off, their best trade chip in defenseman Mikhail Sergachev was already dealt to Tampa Bay as part of the Jonathan Drouin deal. He was the one youngster who could be the centerpiece of a trade for an impact player so it’s fair to question whether they have the prospect capital to land that big piece via trade.
Montreal’s financial situation beyond this season also is worth noting. For 2018-19, they already have nearly $58MM committed to just 15 players. While center Tomas Plekanec ($6MM) is a significant expiring contract, most of his salary is already earmarked to cover Carey Price’s new deal which kicks in then. Fast forward one more year and the commitment stands at over $48MM to just nine players (with captain Max Pacioretty among those slated to become unrestricted free agents in the summer of 2019). Accordingly, it’s fair to speculate that Bergevin may not want to add another high salary that’s signed beyond next season, especially with the expectation that the salary cap is going to continue to flatten out.
There aren’t many teams in dire cap straits either that they could potentially look to exploit. Three are currently pegged to be over (Toronto, Chicago, and Detroit) but they all have players eligible for long-term injury reserve that will mitigate the need to dump a sizable salary. Washington’s in a tight spot as well but they can work around that by filling out the roster with near-minimum salary players instead of necessarily moving someone more prominent out.
All of a sudden, while the Canadiens have plenty of room to work with, the options don’t seem quite as plentiful. Free agency isn’t likely to provide much help while if they want to add an impact player, they may not want to look at players on longer-term deals unless they’re sending at least some salary the other way so while the money is there, there are also some challenges they have to deal with when they go to spend it.
One way or the other though, it’s highly unlikely that Montreal enters 2017-18 with $8MM in cap room which makes them a team to watch for the rest of the offseason.
Performance Bonuses Around The League
In the NHL, there are only a few ways you are allowed to have performance bonuses included in your contract. One way is to be on an entry-level contract, of which almost every one contains some sort of incentive. Young players can earn either Schedule A or B bonuses for various performance markers, though the really big numbers are only usually given out to the very highest of draft picks. Even Mitch Marner for instance, drafted fourth overall in 2015 can only earn up to $850K each season and doesn’t have any Schedule B bonuses in his deal.
The other contracts that can include bonuses are more rare, and they’ll be the focus of this article. These can be given out to players who sign a one-year contract after they turn 35, or a one-year deal coming off a substantial injury (the qualifications for such an injury are that they have already played at least 400 games in their career, and spent at least 100 days on injured reserve in the final year of their previous contract). Many of these have been given out, and we’ll detail them here.
Radim Vrbata – Florida Panthers 
Vrbata was given a one-year deal with the Panthers this summer after a solid season with the Arizona Coyotes, and will earn $2.5MM in guaranteed salary. He also can earn a total of $1.25MM more through performance bonuses:
- $250K for 10th goal
- $250K for 15th goal
- $250K for 20th goal
- $250K for 45th point
- $250K for making playoffs
Mark Streit – Montreal Canadiens
Streit was given a $700K contract from the Montreal Canadiens just this week to add some extra depth to a defense corps that was losing Andrei Markov. His deal includes $300K of unknown performance bonuses, that could take the total contract to $1MM.
Johnny Oduya – Ottawa Senators
Oduya earned a one-year $1MM contract from the Ottawa Senators, and while it’s not clear where he fits in exactly on the blueline he could earn much more should he find a prominent role. The deal includes $1.25MM of performance bonuses:
- $250K for 41st game played
- $250K for 65th game played
- $250K if ranked in top-5 TOI for Ottawa defensemen
- $250K if ranked in top-3 TOI for Ottawa defensemen
- $250K for making playoffs
Chris Kunitz – Tampa Bay Lightning
Kunitz is looking for his fifth Stanley Cup this season with the Lightning, who gave him a one-year $2MM contract. The former Penguin can earn another $1MM in various unknown ice-time bonuses, likely tied to where he ends up among Lightning forwards.
Patrick Sharp – Chicago Blackhawks
Sharp is returning to his old stomping ground this year after the Blackhawks signed him to a one-year $800K contract, but there is no guarantee he plays much of the season. Sharp’s been hurt by several injuries the last few seasons, and because of it Chicago included a $200K bonus for playing just ten games this year.
Mike Cammalleri – Los Angeles Kings
Cammalleri was bought out by the New Jersey Devils this spring, only to immediately find a new home with the Kings on the west coast. His $1MM contract has an additional $200K in performance bonuses, though the exact details are still unknown.
Deryk Engelland – Vegas Golden Knights
When the Golden Knights signed Engelland after the expansion draft, they were bringing back someone who knew the city and could help their young players get acclimated to their new surroundings. They signed him to a one-year deal worth $1MM, but it also includes another $1MM in unknown performance bonuses.
Thanks to CapFriendly for many of the performance bonus details.
Florida Panthers First To Be Linked To Andrei Markov
Just after the Montreal Canadiens announced that they would not be bringing Andrei Markov back for the 2017-18 season, speculation on where he would land exploded. Igor Eronko of Sport-Express was first to link the Russian defender to the Florida Panthers, a team looking to get back into the playoffs following a very disappointing season. As CapFriendly points out, the Panthers easily have enough room to accommodate the veteran defenseman under their salary cap.
Florida does have a lack of left-handed defensemen, with only Keith Yandle and Michael Matheson penciled into their starting group but also doesn’t look like they have much room for Markov at first glance. Already Ian McCoshen, their prized second-round draft pick that made his NHL debut last season looks to be on the outside looking in, and Markov would only further that. There has been rumors of the team trying to move Jason Demers, with one report going so far as to say that he nixed a deal that would have sent him to Vancouver. If Demers was moved out, it would open up some minutes for Markov along with several million in cap space.
Since Dale Tallon was given back the reins of the franchise this spring, he’s made several moves to push the Panthers back towards his direction of the club. Bob Boughner was brought in as head coach, Reilly Smith and Jon Marchessault were moved out and the team has apparently moved on from any thought of bringing Jaromir Jagr back to town. Demers was signed to a five-year $22.5MM contract last summer, one that will actually pay him much less in the latter half and may be palatable to the majority of teams around the league.
Andrei Markov Will Not Return To Montreal Canadiens This Season
It seemed as though the writing was on the wall when the Montreal Canadiens signed Mark Streit to a one-year deal this week, and now it is official. The team announced today that Andrei Markov will not return to the Canadiens for the 2017-18 season. Fans had been holding out hope as recently as Tuesday, when we polled our readers to see where they thought Markov would land. Montreal won easily, with over 18% of the vote. 
Interestingly, Eric Engels of Sportnet reports that Markov had not yet made contact with other teams about his future, though that is obviously going to change with this announcement. The 38-year old played 990 games with the Canadiens over a 16-year career, registering 572 points and will go down as one of the greatest defensemen ever to pull on the sweater. He is second all-time among Montreal defenders in points, an incredible mark for such a storied franchise.
Markov had been rumored to be after a two-year $12MM contract from the Habs, but will likely have to settle for something less on the open market. Despite his obvious ability teams are wary of his age and foot speed, though neither hampered him at all last season. With 36 points in 62 games he remained one of the best puck-moving offensive defensemen in the league, a natural quarterback on the powerplay and an effective defender in his own end. While it’s obvious that will eventually come to an end, he can still provide some high-level play for whichever team lands him.
Because it’s so late in free agency it is tough to see where there are openings for Markov, as most of the contenders have already tried to fill their holes with other options. Dallas could have used him to help their left side but instead added Marc Methot to eat up minutes, while teams like Toronto, Tampa Bay and Pittsburgh gave multi-year contracts to less effective veterans. If Nashville didn’t already have eight defensemen under contract, a reunion with friend and former defense partner P.K. Subban could be interesting.
Regardless of where he eventually ends up, this season should push him over the 1,000 game and 600 point mark, incredible feats from a sixth-round pick who some doubted would even make an impact at the NHL level. Markov has carved out quite a career for himself, one which deserves another chance at the Stanley Cup.