Today marks the first of the offseason critical dates, even though the offseason hasn’t started yet. Games Four and Five of the Stanley Cup Final are tonight and tomorrow, but starting today, all other teams but the Stars and the Lightning can buy their way out of contract mistakes.
Buyout Rules — some new this year
This first buyout window runs from today through October 8 at 5 p.m. Eastern Time. All players bought out become Unrestricted Free Agents, and the free agency begins the next day, October 9, at noon.
There is speculation that with the stagnant salary cap, teams wanting to cut actual cash salary costs and the lack of trade options for those contracts that cost more than the player returns in value will lead to more buyouts. Buyouts are, short of a player going on LTIR or retiring, the only way to remove cap hits from the NHL marketplace and make it possible for new, foolish contracts to be signed on free agent day. Sometimes a buyout and a new deal is the best thing that can happen to a player. Sometimes it’s the only way a team can cope with a contract for a player who won’t waive a no-move clause.
There are some new rules about buyouts in the CBA Memo of Understanding signed in July, but the basic process hasn’t changed.
A buyout takes the remaining years of salary and reduces it to 1⁄3 or 2⁄3 of the remaining value and spreads that over twice the number of years. The reduction amount is determined by age of the player with anyone 26 or over getting the reduction to 2⁄3.
CapFriendly has a calculator which makes learning the ins and outs of the calculation superfluous beyond understanding that signing bonuses are not included in any buyout and are paid in full.
Teams are required to place all players they plan to buy out on unconditional waivers first, and after 24 hrs (the next day at noon), they can buy the player out. For players with a no-move clause in their contract, which makes them normally immune to the waiver process, they can agree to be bought out immediately. While it’s technically possible for a player to be claimed on unconditional waivers for the purposes of a buyout, it’s never happened to my knowledge.
It has always been possible to buyout 35+ contracts (deals signed after the player is 35), but in the past only the salary was reduced, not the cap hit. Now, some 35+ deals can be bought out and the team can receive cap hit relief if they are multi-year deals with no signing bonuses after year-one and a static or increasing salary year-over-year.
There is a second buyout period open only to teams who had arbitration cases. It begins after their last arbitration case is settled, and is restricted to contracts with cap hits of $4,000,000 or more for this season only. For most teams this will happen in late October or early November this year.
Last year there were 11 players bought out, including Patrick Marleau. But far from being the end of a career, three of the players bought out are now in the Stanley Cup Final: Kevin Shattenkirk, Andrej Sekera and Corey Perry.
Shattenkirk’s two years remaining at $6.65 million is on the Rangers’ books for three more seasons. They are hit with a significant amount this coming season of $6.083 million, but the final two years are only $1.433 million each. The Rangers also have Dan Girardi and Ryan Spooner on the books from their buyouts.
Shattenkirk, meanwhile, signed with Tampa for $1.75 million for the 2019-2020 season, and he will be a UFA soon. He has had an excellent year for them, and this reset of his contract value at age 30 worked out very well for him. He should be a sought after free agent this off-season, and he will be able to pick another contender like he did last offseason.
Perry had a monster of an albatross contract with an AAV of $8.625 million and he was getting too old to be worth it. Anaheim has a hit of $6.625 for the coming season, and then only $2 million for the next two years. As they try to rebuild, getting out from under that deal was good for them, and it sure worked out well for Perry. He signed a one-year deal in Dallas for $1.5 million, and had a decent regular season and a good playoffs, making him able to try again for a good deal at age 35.
Sekera was bought out of a $5.5 million AAV deal by Edmonton, and he also signed with Dallas for $1.5 million. His contract was devoid of bonuses and had declined in salary to the point the Oilers have only a $2.5 million cap hit this coming year and $1.5 for two more. Sekera, at 34, is trading on his ability to play simple defensive hockey, and he still adds value reasonable to his new contract amount. He’s a bigger gamble as a UFA in a few weeks than Shattenkirk, however.
Bought-out players often have injuries in their recent past, and the buyout is phase one of some new team taking on the risk of employing that player by paying them a lot less. In this offseason, two other things may factor more in who gets bought out: How broke the team is in terms of actual cash flow, and what their cap and cash budget for the coming season is.
There are teams out there with cap space who will take your bad contracts if you pay them, but both Buffalo and Ottawa have indicated they don’t want to spend dollars. Detroit has the field nearly to themselves here, but there’s only so much they’ll be willing to add to a roster whose main problem has been years of ageing players on bad deals.
There were only eight buyouts in 2018, 14 in 2017, 15 in 2016, 11 in 2015, and 13 in 2014. There were 19 in 2013 after the season with two in January before it began as compliance buyouts were allowed for one offseason under the new CBA. In prior years, fewer than 10 in a season weren’t uncommon, with a few years with numbers in the mid-teens.
Last offseason, when the salary cap didn’t go up as much as initially expected, there were a few lower-value deals bought out, but generally, since the 2013 CBA, most buyouts are for big deals for older players in the final years of what was a monster UFA signing.
The Leafs are not the only team to have paid someone else to do the buying out as they did with Marleau, and the Leafs have also signed a previously bought-out player when they added Tyler Ennis to the roster in 2018. Buyouts can create opportunity for teams looking for a certain sort of depth player, but Ennis post-buyout was a great deal more interesting than Marleau.
Who will be bought out?
One thing is obvious: The Maple Leafs don’t have anyone they need to buyout. The roster cleaning was all accomplished last offseason. But many teams have cap and cash problems as well as one or two of the traditional candidates for a buyout hanging around. The interesting wrinkle this year is that 1⁄3 or 2⁄3 dividing line. Conventional practice is that teams buy out the oldest players with the least number of years left, but for bang for you buck in creating cap space, a younger player is a better option.
Two players Sportsnet suggested are buyout targets illustrate this:
Karl Alzner with two more years at a cap hit of $4.635 has only $6.5 million in total salary remaining over those two years, including $1.5 million in signing bonus. But because he’s over 26 and falls under the 2⁄3 rule, his buyout saves only $1.667 million in salary. The cap hits are almost $4 million this coming season and $2 million in 2021-22. The final two years are an easy to ignore $833,333.
Montréal would need to think long and hard about the value of buying out that contract. They can bury $1.075 million this year and $1.125 next year — Alzner has played most of the last two seasons in the AHL — and then they’re done with it.
Meanwhile in Chicago, sits Olli Maatta with two years left at nearly Alzner levels of pay. If you remember him as good back in the days when Leafs fans wanted him in the Phil Kessel trade, you might find this interesting:
Buying out the younger Maatta saves Chicago $5.44 million in salary, and carries cap hits each year of just over $680,000. He’s considered 25 for buyout purposes since all buyouts proceed as if they occurred in June. If Chicago were a more cash-strapped team, I’d expect this to happen instantly. But they aren’t in a position where they must buyout Maatta, and they might be able to move him in a trade. He’s not unplayable, he’s just not $4 million of defenceman.
A trade would pay Maatta more salary, but a buyout would put him in a position to be one of the better defence UFAs available, and he can decide who he’ll play for. He doesn’t get to choose, however, Chicago does. They might wait until after the draft and the last day before the buyout window closes and free agency begins to make that decision, too.
Speaking of Phil Kessel, while it’s hard to tell what the new GM in Arizona will really do, rumours say job one is cutting salary, so it’s tempting for Leafs fans to imagine the Coyotes buying out Kessel’s last two years just for the cash savings, giving the Leafs a break on the retained cap hit. The bad news for everyone but Kessel himself is that a buyout saves only $666,667 in salary paid because the Leafs gave him one of their signing bonus-laden buyout-proof contracts.
The Coyotes would only gain $566,667 in cap space this coming year and next, so it’s not even worth doing. The Leafs would only gain $100,000 this season. So, alas, the signing bonuses get you good players, but they bite you in the end. Just as they’re designed to do.
We should start to hear about this season’s buyouts as soon as today at noon.