Friday, September 3, 2010

An opportunity lost

It's been nine months since New Year's day, the day Pierre Gauthier could have started to negotiate a contract extension for defenceman Andrei Markov. And while there was never any rush to do so, it now appears that one of the options Gauthier had available to him to keep Markov's cap number relatively low has been taken away.

With the NHL and NHLPA agreeing to amend the CBA midstream by changing the rules on long-term contracts, Markov's next deal is likely to take up a big chunk of cap space.

I don't think that Gauthier was actually considering throwing a 10-year contract Markov's way, in fact I'd have been shocked if he did. But now, he can't. Or at least it's not worth the trouble with this new formula for calculating cap hits on these long-term deals.

You've got to wonder if Gauthier won't have regrets that he didn't jump through this loophole while it was still open when Markov is suddenly counting for $7 million - or more - against the cap. And that cap situation will probably be pretty tight to begin with when Markov's contract expires on July 1.

Of course, this might also be a good thing because who knows how the Devils, Canucks, Hawks, Red Wings and Bruins will feel about those long-term deals five years from now when those players refuse to retire.

Speaking of tight quarters, with Carey Price's contract being signed yesterday the Habs cap figure has come into focus. I've seen it reported that Montreal has over $1.3 million in cap space remaining with 22 players signed, but that's not entirely accurate.

Yes, Gauthier could spend another $1.3 million if he wants, however he would have to use the dreaded bonus cushion in order to do so. His real level of penalty-free flexibility is a little over $950,000 (by subtracting Lars Eller's $425,000 in bonus money), which would get largely gobbled up as soon as a forward from Hamilton makes the club.

That's why it wouldn't shock me to see the Habs go with a 22-man roster to start the season, with defencemen Ryan O'Byrne and Alex Picard as the only two extras.


BigT said...

OK a bit late, so I'll keep it short this time. BUT, a brilliant post again Arpon. What I was thinking of exactly! I touched on the 10-yr deal in a previous comment and feel a bit cheated that certain teams got away with cheating the CBA while Montreal doesn't get the same luxury. Oh well!

p.s. Very happy you're back to posting more regularly on the blog. Good work!

Olivier said...

They don't do quirky 12 years deal. They just don't. The habs manageent seems hell bent on paying full value up front for talent. That means we have a little less cap space, but whatever happens, we are cool and we have half of the salary cap available in a 3 years time frame.

If they signed Pleks, they will sign Markov. It won't be a value contract (ie: the player being paid half what he is worth), but it's been a long, long time since the CH commited real UFA money to a player who wasn't mpstly worth it.

Michael said...

Well I have to disagree on this.. the opportunity is not lost what so ever. If you look carefully at the rules, it will really effect those contracts either over 10-12 years in length or people signing into their 40's.

Markov can still sign a multi year contract say, 7 years, and still not be affect what so ever by these new rules.

If you structure said contract:
year 1 - 9 mil
year 2 - 9 mil
year 3 - 9 mil
year 4 - 5 mil
year 5 - 4 mil
year 6 - 2.5 mil
year 7 - 1.5 mil

Thats 40 mil over 7 years which is a cap hit of 5.71 million per season (almost identical to his current contract!). Let's say for arguments sake that Markov retires after year 5, he would have earned 36 mil over 5 years or 7.2 million per season.

None of these year are when Markov is 41 or older and since he will not be 35 when his contract is signed, he can retire and not have his remaining years count against the Habs cap.

The second provision is that any years between 35 and 40, the minimum cap hit is 1 mil per season. This is to ensure that people do not try to replicate the Kovalcuk contract with multiple years at 500k. But as you can see, even at 1 mil per year, you can significantly reduce the cap hit.

Milos Coko said...

I agree with Michael. I really don't see how the NHL's decision has any effect on a potential Markov long-term contract.

I could've misinterpreted the ruling, but technically we can sign him to an 8 year deal (as opposed to the 7 proposed by Michael), therefore further reducing the cap hit.

If you actually look at the situation objectively though, very few teams have genuinely taken advantage of these long term contracts. There could be many risk management reasons for doing this - and I imagine a sticky situation could be simply providing the cashflow to finance the first few years of a contract like this.

However, considering Markov's age, ability and value to the team, I still think he's a prime example of players that teams should be offering these types of contracts to and I wouldn't be surprised in the least if we see Gauthier offer something similar to this around Christmas time.

Bill said...

Just as a note according to the habs have 1.9 mill in cap space.

Craig said...

I have to agree with those who have posted before me. The NHL's agreement with the PA only made the situation clearer than before. You can still structure contracts in a way that significantly reduces the cap hit - just not in the same way as before. Markov is prime for one of these deals.

BigT said...
This comment has been removed by the author.
BigT said...

*disclaimer* I deleted my above post in order to repost it with more info after properly reading through the agreement.

@ Olivier

I don't think it's a matter of the Habs doing or not doing "quirky 12 year deals". They have never had a proper chance to do a long-term deal like this because we haven't had a bona-fide franchise player up for renewal with an age that could fit into these contracts. With Markov we do. He is a cornerstone for the team and he is 31, so a 10yr deal would make sense as retirement deal.

@Michael (and others who agreed with your post) I also agree with your post in it's general sense. I love the creative accounting, however, in my original post, I had alluded to an earlier comment I had made on this site where I had talked about how it could be possible to sign Markov for 10 years to LESS than his current cap hit. Although your numbers work from a purely numerical standpoint, I don't think Andrei would be too thrilled about only making 2.5M or 1.5M when he is 37 and 38 where his Russian compatriot Sergei Gonchar just signed a pretty healthy deal starting at that age.

The other thing is that many top level defensemen (especially ones with speed) are playing well into their late 30s, therefore there would be no reason for him to retire. The whole point of these contracts that stretch into the 40s is that is became almost obvious they would not be playing at that age and hence they really wouldn't be leaving any money on the table.

So opportunity lost? Yes, still believe it is. (this is what I wrote originally in my deleted post)... but after reading that the amendment only takes affect for the year in which the player turns 41....

I'll amend it to... partially lost.

It would've been great to sign Markov till 41 or even better till 42 with the drop-offs that we've seen in salary structure and we may have gotten a cap hit of 4.5. I think now, we'll be lucky to get a cap hit of under 5.5 noting that we're restricted till 40.