William Nylander, the salary cap, and you

In case you missed it, William Nylander signed his new six-year deal on Saturday. Now that we’ve swept up after the party, it’s time to take a look at the complicated salary and cap hit numbers.

As was discussed at length during the world’s longest and most-watched contract negotiations, when an NHL RFA signs late, their cap hit and the AAV (average annual value) of the contract is not the same every year. The ongoing theory over the last weeks and months was that the Leafs wanted to sign this deal late in order to reduce the cap hit in subsequent years. This idea was advanced all over as a clever scheme to fix the cap next year.

However, because the first year of the contract contains a signing bonus, that effect is largely wiped out. Considering that the negotiations went to the last few minutes, and the Leafs ultimately agreed to that year-one signing bonus, they either never cared at all about a few hundred thousand or they cared about it less than the bigger numbers in the deal. The bigger numbers are as follows:

William Nylander contract via Cap Friendly

This contract is heavily front loaded. The amount you can front-load is restricted by the CBA, but as you can see, the first year salary is double the sixth. This deal also includes a lot of signing bonuses, as we should expect all Leafs players on big contracts to demand. The purpose of signing bonuses is to guarantee the player gets paid at least that much if the NHL ends up in a lockout or strike.

As Arvind has detailed on the Back to Excited podcast, the time value of money comes into play with signing bonuses too. A dollar received now is worth more than one received next year. In the first eight months of this contract, Nylander is paid $10.3 million in signing bonuses (less escrow) and the prorated portion of the $10 million in year-one salary he will actually receive.

In this case the year-one signing bonus has two other effects: since Nylander is not actually paid the full amount of his base salary as shown above, but instead receives an amount pro-rated by the number of days he’s on the roster, the bigger the signing bonus, the less he loses. His salary in year-one is reduced by just over $3 million.  The other effect is that the bigger that signing bonus, the bigger the AAV in year-two and beyond. Cap Friendly has all of these calculations on their Twitter account, and I have no plans to re-invent that wheel.

When you add up the breakdown it comes to $45M, however the $10M base in year 1 is prorated. Meaning he loses roughly $3.172M for the 59 days lost, bring his net amount to the 41's

— CapFriendly (@CapFriendly) December 1, 2018

The deal buys one year of UFA status, and it includes a 10-team list for the no-trade clause in the final year. No-trade and no-move clauses can only appear in years the player would be UFA. Nylander will be 28 when this deal expires and there will be a new CBA in place then with new contract rules we can only speculate about now, but the chances the owners at least try to get five-year limits on contracts is high.

When the deal expires, Nylander will be earning a salary of $6 million, which by then will seem comically small, and his cap hit in the final year is just under $7 million, which won’t seem large either. In a period of escalating salary cap upper limits, which we should expect to continue as the league expands, that’s just how it is. What looks like a big deal now, won’t in a few years.

The Past

Without being privy to how this deal was negotiated, it appears that it was set at the $45 million in salary (although some of that will never be paid as mentioned above), which is $7.5 million per year, and then the arrangement of salary year by year and the amount of the signing bonuses was sorted out to keep the total cap hit decently close to that number.

We’ve used Matt Cane’s salary model a lot in discussing potential deals, and his prediction for Nylander on a six-year deal was $6.9 million. And while that’s the year-two and beyond AAV of this deal, the overall deal is for more than that, with the extra paid this season. I wanted and expected a seven-year, $7 million deal to be signed last summer, and if you cut that back to a six-year deal, the total salary would have been $42 million, which is nearly exactly what this deal has, and the AAV would have been $7 million a year, which is nearly exactly what this deal has after year-one.

Once you blow away the obfuscation of the year-one proration, this deal is exactly what was predicted. Note that Cane’s model predicts based on past awards, it’s not declaring the player “should” be paid that amount. That’s where you get out the simple boxcar point stats to decide that. Or points per game if you want to be fancy.

The Present

Forget Nylander for a bit, and let’s look at the Leafs as a whole. They have to absorb a $10 million cap hit for the remainder of the season, but they can accommodate that easily. The Leafs also will likely benefit next season by not having any performance bonuses earned this year roll into next year. This roll over happens if a team is operating at the cap or in LTIR space. While the Leafs have $5.3 million in LTIR space available, they aren’t using it and are nowhere near the salary cap upper limit.

As of now, Cap Friendly is showing the Leafs with $5.1 million in cap space, which is just under the $5.4 million in total possible bonuses. However, there is an extra person included on the roster, and with a cut necessary, that space will increase by at least $650,000. That leaves exactly enough space for the bonuses. It’s weird how the math works out on this deal.

The Near Future

Let’s flash forward to the trade deadline. At that point, the Leafs will have some idea how much of that potential pile of performance bonus money will really be earned and paid out, and therefore will count against the cap. In addition, throughout the year, the cap space can be said to accumulate. A player added at the trade deadline only counts against the cap for the period they are on the Leafs. To make this easy to comprehend, Cap Friendly lists the total face-value cap hits that the team has room for at that time. For the Leafs, without removing their extra man, it’s at just under $24 million. That’s a lot of rental space. You can fit Connor McDavid and Jack Eichel in that room.

Given roster changes over the season, that available space will move up and down a bit, but at the deadline, if they wish to, the Leafs can add some very expensive players and not do anything to harm their cap situation next year.

They can add someone right now if they wanted to. Keeping the bonuses from rolling over is not a requirement, it’s just a nice-to-have. And not all those bonuses will get paid. They are apportioned out like this:

• Auston Matthews: $2.85 million
• Mitch Marner: $850,000
• Par Lindholm: $850,000
• Igor Ozhiganov: $850,000/

Matthews and Marner may well earn all of theirs, but the other two may well not.

Right now, and up to the trade deadline, the Leafs have the roster and cap flexibility to make any trades they might wish to. If Rick Nash is feeling like giving the game another try, I don’t think the Leafs will say no to a one-year deal for him.

The Future

If your mind is already bent towards the idea that the Leafs now don’t “like” William Nylander because they had a tough contract negotiation with him, that’s going to affect how you prognosticate on the future.

Confirmed: Nylander has bigger balls than the rest of us. https://t.co/shAByAfKEF

— Eddie Lack🇸🇪 (@eddielack) December 1, 2018

My feeling is that a hockey team that wants a player to be obedient in contract negotiations and then to play like it’s his last day on earth in every game is asking for the impossible. There is a price to pay for players who will produce at their best all the time. The Leafs will be paying that price with Auston Matthews and Mitch Marner.

Nylander’s deal has signing bonuses, which can be a double edged sword for a player. They do provide some lockout protection, but they also can make a player easier to trade. However, with this Nylander deal we need to ask: Easier than what?

If he had signed that six-year $7 million deal last July, he could have an identical deal two or three years from now to what this one will be. A depth player deal like Matt Martin’s, that had nearly all signing bonuses and a tiny amount of salary in the last years of his deal, is a made for trading contract. Nylander’s cash salary of $2.5 million in years three through six might be appealing to the very short list of teams that have operating budgets that restrict their actual spending. But the cap hit is still the cap hit, which is still what it would have been in our imaginary summertime deal. Most teams trading for a top-line player are worried about their cap hit, not their cashflow.

In year-two, Nylander’s salary is very low and the signing bonus is very large. And that’s next year. So, by all means, if the Leafs were planning in advance to trade Nylander this summer to the Ottawa Senators, who also plan to play him one season and then trade him, this is a sharp, sharp deal. This structure absolutely makes Nylander easier to trade to a short-term thinking, cash-poor team. But to assume in advance that this is the plan, rather than just an option that exists on any signing-bonus laden contract takes a mind bent toward’s Elliotte Friedman’s ideas that the Leafs will trade Nylander because they can’t countenance someone with big gonads around the place. Or that they can’t do math, which seems a little unlikely.

At the end of the day, how tradable a player is and how much a team wants to trade him depends on his actual production on the ice relative to his cost in cap hit not salary. Oh, and of course, if he likes museums, you factor that in, but I’ve never got the impression the Leafs are worried about anything beyond the process that leads to winning.

$56,275,699

That’s the total cap hit for all contracts and ancillary payments on the Leafs’ books for next season. They need to re-sign Matthews, Marner, and Jake Gardiner out of that and add in some depth players and a backup goalie to get under the upper limit which is projected to be around $82 million.

With some unknown amount over $25 million to do all that with, the Leafs have several options to clear up some cap space if they need to. The first and most likely is that with either Gardiner re-signed, which is a possibility, or someone else taking a similar salary in that position, the Leafs will have to replace Ron Hainsey with a much cheaper deal. The Leafs have already chosen a path to have a very inexpensive defence and a very expensive forward group. That’s not likely to change. By this summer, when these decisions will actually be made, they’ll know how this works out on the ice, and if they need to rethink it at all.

In the meantime, let’s hold off on the fantasy trades for a player who is yet to even hit the ice for the Leafs this year and instead watch Timothy Liljegren and Rasmus Sandin play in the AHL and later this month at the WJC. Their projected arrival in the NHL likely has more impact on actual decisions made this spring, this summer or next year than any hurt feelings about a contract negotiation.

Now if you want to see a contract written to be traded, look up Jakob Chychrun. That’s a future Chicago player, if ever I saw one.

Once Matthews and Marner have their deals done, then the picture will be clearer. Until then, it’s speculating in the advance of too much needed evidence to say anything much useful beyond, “Well, it’s harder now then when tanking to fit everyone in under the cap.”