A hard salary cap has led to general managers getting creative and signing star players to 10+ year front loaded contracts in exchange for a lower cap hit.
The latest was New Jersey Devils GM Lou Lamoriello who re-signed superstar winger Ilya Kovalchuk to a 17 year deal worth $102 million.
Some have criticized the deal but Lamoriello’s creativity has Kovalchuk locked in his prime years for a cap hit of just $6 million per season.
The deal is structured where if Kovalchuk’s play begins to deteriorate in his upper 30’s, retirement will likely be an easy decision, based on the bulk of money Kovalchuk will make early in the contract.
Kovalchuk, 27, will receive $69.5 million through the first seven years of the deal, $80 million through eight years of the deal and a total of $95 million through the first 10 years of the deal.
Kovalchuk is due a total of $7 million in the final seven years of his deal and a total of only $3.5 million in the final six years of the deal.
The Russian winger will make $6 million per season in 2010-2011 and 2011-2012. Kovalchuk will then make $11.50 million per season for the next five seasons (2012-2018), followed by $10.50 million (2018-2019), $8.50 million (2019-2020) and $6.50 million (2020-2021), which marks the first ten years of the deal.
If healthy, Kovalchuk is a lock to play 8-to-10 more years. The deal is brilliant from the Devils end in that when Kovalchuk’s skills begin declining, at least financially there will be little incentive to keep playing.
Therefore, if Kovalchuk retires before the end of his deal, New Jersey will be off the hook for the $6 million a year cap hit.
Lamoriello has followed a similar trend league wide in the past year.
Last year, the Detroit Red Wings re-signed Henrik Zetterberg to a 12 year deal worth $73 million and winger Johan Franzen to a 11 year deal worth $43.5 million.
Both deals are front loaded with Zetterberg receiving just over $69 million in the first 9 years of the deal. Zetterberg is locked in for a cap hit just over $6 million per season.
Other notable deals include the Vancouver Canucks signing goaltender Roberto Luongo to a 12 year deal worth $64 million, with the deal extremely front loaded in the first seven years.
The Chicago Blackhawks also haven’t been shy of giving out 12+ year contracts. The team signed Marian Hossa to a 12 year – $63 million deal in the summer of 2009 and this past December signed defenseman Duncan Keith to a 13 year – $72 million extension.
Both deals were heavily front loaded, giving Chicago the opportunity to lock up one of the top defenseman in the game to a cap hit of only $5.5 million.
The multi-year contracts in excess of 10+ years maybe a thing of the past when the current collective bargaining agreement expires in September 2012.
There is believed to be a strong push by the league to enact a limit on the term of contracts. Some are pushing for a 5-to-7 year limit with a lot of support for contracts to be no longer than five years.
The length of contracts is an area that the players won’t give up lightly in the next set of CBA negotiations, especially if there are no concessions made by the owners regarding the hard cap.
However, if a limit on the term of contracts is put in place, it could play a pivotal role in the Penguins trying to keep Sidney Crosby, Evgeni Malkin and Jordan Staal together 3-to-4 years from now.
If a five-to-seven year limit happens, the opportunity won’t be there for Pittsburgh to sign Crosby (for example) to a 15 year contract that could be worth $100 million or more but also give Pittsburgh some cap space flexibility by taking on a lower cap hit for the excess amount of years.
The same goes for Evgeni Malkin and Jordan Staal.
Crosby will be 25 when he is scheduled to become an unrestricted free agent in the summer of 2013. Malkin will be 26 when he could become a UFA in 2014 and Jordan Staal will be 24 will he’s set to become a free agent in 2013.
All three will be entering the prime of their careers and it’s very difficult to take a below market deal on a 5-to-7 year deal than it is for a deal in excess of 10+ years.
Crosby will always be the Penguins top priority but a potential term limit on contracts could be a nightmare situation for the Penguins in trying to keep both Staal and Malkin.
The ability for a GM to offer an excess amount of years before a player turns 35 is a loophole in the CBA that gives GM’s an opportunity to get creative up against a hard salary cap.
The Penguins may have missed out on that opportunity when they were unable to lock up any of their “Big Three” to contracts longer than five years.