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Do all long-term contracts have to be bought out?


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#1 jagori78

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Posted 04 January 2013 - 06:00 PM

Assume that Luongo is traded to Toronto for whatever. Kadri and Bozak, just for the sake of this argument. Does Toronto get stuck with Luongo's cap hit after he retires till the end of the deal? Or can he be traded to Phoenix or whoever to help them make the cap floor. Do you think this will be allowed?

If this isn't possible, then Luongo is untradable. He must be bought out now or next year. He's not the only one, as Hossa, Pronger, Bryzgalov, Mike Green, and Zetterberg will be in the same situation.

Players like Lecavalier and Shea Weber are safe, because Tampa and Nashville will need to make the cap floor in 8 years time. Even if they retire, the cap hit for those two will help those teams.

Big market teams that spend to the cap may be forced to buy-out those players now that aren't considered marketable. These big teams can afford to do so, because they money they pay in buy-outs is roughly equal to what they would have paid anyway in revenue sharing. Instead of cutting a cheque to Bettman and the Coyotes each year for 7 million for revenue sharing, they give it to the player they buyout, and get the cap space back.
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#2 SEAN HARNETT

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Posted 04 January 2013 - 11:28 PM

I think Buttman is pushing to have the original teams, stuck with the cap hit for the duration of said contract. I heard this being purposed earlier on during negotiations. I hope it isn't true because the canucks will be stuck with an anchor contract for a long time!
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:towel:

#3 WHL rocks

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Posted 05 January 2013 - 04:21 AM

If Luongo is traded to Leafs and retires after 5 seasons, the cap recapture rule would result in the Canucks being hit with Lu's cap hit for the remaining years of his contract.

No matter how many times Lu gets traded, if he retires before his contract retires the cap hit would go to Canucks for the remaining years of Lu's contract.

This is why there is a strong chance Lu will not get traded IMO.

Luongo will not be bought out now or next year. He has too much money owed on his contract to buy him out.
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#4 babych

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Posted 06 January 2013 - 10:57 AM

If Luongo is traded to Leafs and retires after 5 seasons, the cap recapture rule would result in the Canucks being hit with Lu's cap hit for the remaining years of his contract.

No matter how many times Lu gets traded, if he retires before his contract retires the cap hit would go to Canucks for the remaining years of Lu's contract.

This is why there is a strong chance Lu will not get traded IMO.

Luongo will not be bought out now or next year. He has too much money owed on his contract to buy him out.

Is this still part of the new CBA? I know that it was on the table at one point but I'm unsure as to if it made it into the final draft.

Hope it didn't.
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#5 WHL rocks

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Posted 06 January 2013 - 11:08 AM

Is this still part of the new CBA? I know that it was on the table at one point but I'm unsure as to if it made it into the final draft.

Hope it didn't.


I've been trying to find out since 3am. I don't know, but I read an article claiming NHL wanted it and the players were on board they just disagreed on the number of years the contract length had to be in order for this rule to kick in. 5 vs 7.

Don't know what happened with this proposed rule. I guess we'll find out when the full details come out.
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#6 Gerg

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Posted 08 January 2013 - 04:15 AM

If Luongo is traded to Leafs and retires after 5 seasons, the cap recapture rule would result in the Canucks being hit with Lu's cap hit for the remaining years of his contract.

No matter how many times Lu gets traded, if he retires before his contract retires the cap hit would go to Canucks for the remaining years of Lu's contract..

Not quite it. That was the original proposal by the league, it's been revised and is quite confusing on first glance.

http://espn.go.com/b...ore-cba-details

THE LUONGO RULE
This is another rule from the league aimed at hammering current back-diving deals (front-loaded, "cheat deals"). However, this has changed from its original form when the NHL first proposed it in October.

In the original formula, if a player like Roberto Luongo was traded and retired before the end of his deal, the Canucks (the team who signed him to the contract) would assume his remaining $5.33-million cap early hit in retirement. The new rule in this tentative agreement is different. Now, for any contract in excess of six years, both teams involved in a trade on a contract like Luongo’s would be penalized if he retired before the end of his deal.

To wit: let’s say the Canucks trade Luongo soon. Luongo has played two years of his 12-year contract, the Canucks paying him $16.716 million in salary but only absorbing a $5.33 million cap hit each year. That’s a cap savings of $6.056 million over two years so far for Vancouver. Under this new rule, should the Canucks trade him now and he retires with three years left on his contract, Vancouver would be charged that $6.056 million in cap savings over the final three years left on his deal from 2019 to 2022. However, let’s say for argument’s sake Luongo gets traded to Toronto, the Maple Leafs also would be subject to cap penalties if Luongo retires before the end of his deal.

To wit, part 2: If Luongo were to play the next seven years of his deal in Toronto before retiring, the Leafs would be paying him $43.666 million in salary but only counting $37.31 million against the cap over those seven years, a cap savings of $6.356 million. So if Luongo retires with three years left on his deal (because his salary falls to $1.618 million in the 10th year and then $1 million in the last two years of the deal), the Leafs would get charged that $6.356 million on their cap spread evenly over the remaining three years of his deal.

And obviously, if players under these back-diving deals are never traded, but retire before the end of their deals (Marian Hossa in Chicago), their current teams get charged the cap savings spread evenly over the remaining years of the deal.



From what I can see, the formula basically takes how much you have "spent" on the cap, compares it against how much is paid to the player, gets the difference and applies that to the cap of the team that signed him for all subsequent years after he retires.

Then they apply a similar formula for the years that the player played for his next club and that team gets to face the cap hit.



Essentially, they made the Luongo contract nearly immovable without some crazy finagling and throwing out a hope and prayer that he doesn't retire.
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#7 WHL rocks

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Posted 08 January 2013 - 12:08 PM

Not quite it. That was the original proposal by the league, it's been revised and is quite confusing on first glance.

http://espn.go.com/b...ore-cba-details

From what I can see, the formula basically takes how much you have "spent" on the cap, compares it against how much is paid to the player, gets the difference and applies that to the cap of the team that signed him for all subsequent years after he retires.

Then they apply a similar formula for the years that the player played for his next club and that team gets to face the cap hit.

Essentially, they made the Luongo contract nearly immovable without some crazy finagling and throwing out a hope and prayer that he doesn't retire.

Yes, my post you are responding to was from July 5th, before the new details came out of the cap recapture rule on July 7th.

I think it's a great rule. All the cap circumventing contracts 7 years or longer have been rectified so teams won't get away with what they attempted to do.

I don't think it makes Lu immovable at all. If he is traded today to the Leafs and retires 3 years before his contract expires as expected. TOR would be on the hook for approx $6 mill in Lu's cap hit over 3 years, so about $2 mill per year. Canucks have saved approx $6 mill on Lu's cap hit vs the actual salary paid to Lu so they would also be on the hood for approx $6 mill spread out over 3 years.

If Luongo retires 1 year before contract expires, Vancouver would be hit with $6 mill cap hit over 1 year.

The rule is quit simple actually....

Edit, It's explained here in easy to understand format.

The simplest way to explain it is this: Let's assume the Canucks and Maple Leafs make the deal. Vancouver would be responsible for the "cap benefit" that it received in the first two years. Toronto would be responsible for any remaining "cap benefit" it gets as a result of contract structure if he walks away early.



Here's the math. Luongo salary:

2010-11: $10 million US
2011-12: $6,716,000

That's a total of $16,716,000.

Luongo's cap hit is $5,333,333. You multiply it by how many years he spent with the Canucks, so, in this case, that figure is doubled. That's $10,666,666.

What was the cap benefit to Vancouver? You take the actual salaries paid ($16,716,000) and subtract the total amount of cap space the Canucks used ($10,666,666). The answer is $6,049,334.

That is the "cap benefit" Vancouver received in the first two years of Luongo's contract. The key -- and the thing I had to check -- is that this number has zero immediate effect on the Canucks' cap situation. It is basically "frozen" and does not become an issue unless he retires before his contract is up.

So let's say he happily goes to Toronto (and really, who wouldn't happily go there?), spending seven seasons there before saying, "I've had enough" in the summer of 2019.

Actual cash numbers

Here are his actual cash numbers for those years:

2012-13 through 2017-18: $6,714,000
2018-19: $3,382,000

He would then walk away from three years at a combined $3,618,000. And, it's time for the penalties.

Vancouver's "frozen" $6,049,334 thaws. It is divided by the number of "unused" years in Luongo's contract -- three. The figure is $2,016,445. The Canucks will get a "cap penalty" at that amount for the 2019-20, 2020-21 and 2021-22 seasons.

As for Toronto, the Maple Leafs will pay Luongo $43,666,000. (I'm not pro-rating this year's lockout-infected salary. Going for the easy math here). The total cap hit for those seven seasons is $37,333,331. The difference is $6,332,669. Divide it by the three unused years in Luongo's contract, and the penalty per season is $2,111,890 -- slightly larger than Vancouver's.


Edited by WHL rocks, 08 January 2013 - 01:30 PM.

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