Everything you need to know about buyouts

7 years ago

The National Hockey League season has ended, and we’re now completely into what could be one of the most eventful, tumultuous off-seasons in recent memory.

While the hockey world has spent quite a bit of time, ink and bandwidth on the upcoming entry draft, another bit of business could quietly rise to prominence. With the salary cap either going down or barely budging, the upcoming contract buyout window could be very eventful.

Here’s what you need to know about buyouts.

THE WINDOW

Per the collective bargaining agreement, the first buy-out window opens on June 15 or 48 hours after the end of the Stanley Cup Final, whichever is later – so this year, it’s June 15. The buyout period remains in effect until 5 p.m. ET on June 30, so any decisions on terminating contracts have to be made prior to that date.

CONCURRENT EVENTS

As it turns out, a lot of things also happen during the June 15-30 buyout window.

The 2016-17 salary cap will be decided by the NHL’s Board of Governors on June 22.
The potential 2017-18 NHL expansion will be formally announced, likely following the Board of Governors meeting on June 22.
The 2016 NHL Draft occurs June 24-25 in Buffalo.
The unrestricted free agent interview period begins June 25.
The deadline for qualifying restricted free agents is 5 p.m. ET on June 27.

PROCEDURE

Here’s roughly how buyouts work. You’re a general manager and you have a contract you wish to divest yourself of. The first step is placing the player on Uncondtional (or $125) Waivers.

From the CBA:

“Unconditional Waivers” means the process by which the rights to a Player are offered to all other Clubs, without a right of recall at a Waiver price of one-hundred and twenty-five dollars ($125) prior to a Club exercising its right to terminate a Player’s SPC pursuant to
Article 13 of this Agreement and Paragraph 13(a) of the SPC.

The player will be on waivers for 24 hours. If nobody claims the player, the contract is eligible to be terminated, which I believe occurs by filing a form with the league’s registry. Once the league double-checks that the contract to be terminated has cleared waivers and the appropriate signatures are there, the deal is kaput.

It should be said that players need to be medically cleared prior to going on waivers of any kind. (In other words: you can’t buy out injured players.)

CONTENDERS & CAP CONSIDERATIONS

Current Calgary Flames frequently mentioned in regards to buyouts include Dennis Wideman, Mason Raymond, Ladislav Smid and Matt Stajan.

Cap breakdowns of buyouts are based upon age. If a player is 26 or younger at the time of the buyout, they get one-third of their remaining value. If they’re older than 26, it’s two-thirds of their money. Since all of the potential Flames buyouts are over 26, they all get two-thirds of their money over twice the remaining time they have left.

DENNIS WIDEMAN

Contract: 1 year remaining at $5.25 million cap hit.

Buyout: 2 years at a $1.25 million cap hit in 2016-17 and a $2 million cap hit in 2017-18. (His deal has $6 million in cash left over this season, so it skews the cap hit a bit.)

Savings: $4 million cap savings for 2016-17.

Why A Buyout?: He’s a really expensive third pairing player and you could use the cap hit and/or roster spot to entice Jakub Nakladal or another free agent defender to stick long-term. Or you could do an open competition for the AHL kids for his roster spot. Either way, axing him gives the team flexibility.

Why Not?: $4 million is a lot of money to give to a guy to not play for you. Also, will he be fully healthy by the buyout period after his end-of-season injury?

MASON RAYMOND

Contract: 1 year remaining at $3.15 million cap hit.

Buyout: 2 years at a $1.05 million cap hit for each year.

Savings: $2.1 million savings for 2016-17 (and considering he’d be counting $2.2 million against the cap if buried in the AHL, that itself is another big savings).

Why A Buyout?: He fell out of favour enough last season that they buried him in the AHL just to open up a spot for another player. If he’s in the NHL, he’s a really expensive bottom-six player.

Why Not?: He’s probably still got some value left in him at the NHL level (though not likely at his current cap hit).

LADISLAV SMID

Contract: 1 year remaining at $3.5 million cap hit.

Buyout: 2 years at a $833,333 cap hit for 2016-17 and a $1,333,333 cap hit for 2017-18. (Like Wideman, it’s skewed because he has a $4 million salary but a $3.5 million cap hit left.)

Savings: $2,666,667 savings for 2016-17.

Why A Buyout?: As with Wideman, he’s a really expensive third pairing defender. And his presence is clogging up some positional flexibility for the organization.

Why Not?: Is he healthy enough to buy out?

MATT STAJAN

Contract: 2 years remaining at $3.125 million cap hit.

Buyout: 4 years at a $958,333 cap hit for 2016-17, $1,958,333 in 2017-18 and $833,333 for 2018-19 and 2019-20. (Like Smid and Wideman, Stajan’s cap hit is complicated by signing bonuses and salary differences.)

Savings: $2,166,667 for 2016-17 and $1,166,667 for 2017-18.

Why A Buyout?: Man, he’s an expensive bottom-six center, and his underlying numbers weren’t great last season.

Why Not?: He was good enough to play 80 games in the NHL last season. If he had spent a lot of time in the press box, I could see the justification for a buyout. In addition, is there a better internal option for his role? I can see entertaining a buyout after another rough season, but keeping Stajan’s salary on the books for four seasons on the basis of one bad year seems rather imprudent.

A FEW THOUGHTS

Don’t expect the Flames to buy out anybody right away.

The club’s ownership is full of tycoons that aren’t easily persuaded to spend money willy nilly. The Flames will likely explore other options for divesting themselves of troublesome contracts – Wideman’s likely in particular – before buying them out. But if they can’t find any takers on draft weekend, expect dominoes to begin falling.

With the salary cap likely dropping to between $69.5 million (if the NHLPA doesn’t use their escalator) and $73 million (if they do), the Flames will need to do something drastic to give themselves some financial flexibility.