Friday, February 05, 2016

Performance Bonuses and Their Impact on Edmonton's Deadline Transactions

This past summer, I wrote an article about the cap consequences of the Reinhart trade.  I thought it might be worth taking a look at how things have played out to this point for the players with bonuses, and how that might impact Chiarelli's thought process heading into the trade deadline.  Now, without seeing the actual contracts it's difficult to know exactly which bonuses each player is eligible for, and exactly what the triggers are, but I'll list the bonuses it looks like each player has a reasonable chance at hitting.  It's not impossible that others could be hit, but this is a look at those more seemingly attainable at this point in time.

Klefbom - max 350K in performance bonuses:  He has a very good chance at hitting the TOI/game threshold provided he gets healthy enough to play in 42 games this year, and a half decent chance to achieve either of the plus minus bonus or the 0.49 points per game bonus. Could potentially max out his 350K, depending which bonuses he's eligible for.

Nurse - max 850K: Has a reasonable chance at plus minus bonuses and TOI.  I don't think he would be voted for the all rookie team ahead of Gostisbehere or Parayko. Maybe 425K?

Reinhart - max 2.35M:  He is unlikely to receive any performance bonuses.

McDavid - max 2.85M and Draisaitl - max 2.475M:  Both of these players are grouped together as they have pretty similar outlooks relating to their bonuses.  Both McDavid and Draisaitl look reasonably well positioned to achieve 3 or 4 of their Schedule A bonus triggers, with 4 likely hitting the limit of their 850K .  The Schedule B bonuses are of particular interest.  The only bonus that either player looks like they have a chance at hitting is top 10 in points per game among forwards BUT both have a decent chance.  There is a minimum of 42 GP required, so McDavid in particular has to stay healthy, but McDavid is currently 2nd among forwards in points per game. Draisaitl is 12th and only 0.01 points per game behind 10th (Hall, interestingly enough).  It's possible both could hit all their bonuses, which would be 5.325M combined.

There is a reasonable chance 6.1M in bonuses could be earned between the five players.  So what does that mean?  Well, that means the Oilers are looking at the potential for a significant overage penalty on their 2016/17 cap.  According to general fanager, the Oilers are ~2.8M below the cap at the moment, so assuming that to be accurate, that nothing changes on the roster, and that those 6.1M in bonuses are indeed achieved, the Oilers would have a performance bonus overage of ~3.3M for the 2016/17 season.  I would argue it doesn't make a lot of sense to keep an unlikely playoff team together if it results in carrying an overage penalty forward into a potential playoff season, so I think it would be a good course of action to dump as much money as they can prior to the deadline to avoid as much of that potential as possible*.

In terms of the deadline, the two players seemingly most likely to be on the potential trading block (making significant money) are Schultz and Purcell.  It sounds like Edmonton will look to move Schultz, and assuming no money is retained that will save them some money against the salary cap. There has been some talk of keeping Purcell and signing him to a new contract for less money.  In a vacuum I don't think that's a horrible idea, but the potential of a bonus overage charge changes the picture.  It's not just choosing between keeping/re-signing Purcell and trading Purcell for a pick.  If the Oilers move Purcell now, it probably saves them something like 1.3M against the cap, so keeping him and re-signing him for 2M (not a given he'd sign that, but let's assume he does for the sake of argument) might have an effective cost of 3.3M factoring in the potential bonus overage penalty that could have been reduced by moving him at the deadline.  I think that means the best approach would be to move both Schultz and Purcell by the deadline. The earlier they are moved, the more cap space saved, and while retaining money to improve the quality of pick might ordinarily make some sense, I don't see that as being the best option here if either/both player can be moved without retaining salary, even if the quality of return is somewhat reduced.

* It would also save some money to carry 7 defensemen instead of 8. The combination of extra playing and development time in the minors with some cap space saved probably makes it prudent to demote either Nurse or Reinhart.

If money has to be retained in Purcell and Schultz trades, the Oilers might well choose to look at moving other players in addition to those two, at least partially in an effort to reduce potential bonus overages.

Sunday, June 28, 2015

Cap Consequences of the Reinhart Trade

Ordinarily, it is an enormous positive for a cap team to have a number of players on Entry Level Contracts (ELC), as their relatively small salaries give the team an opportunity to spend more money elsewhere on the roster.  However, an issue arises when a team has a number of players on an ELC with significant performance bonuses.  Teams are only allowed to exceed the cap via performance bonuses by a maximum of 7.5% of the Upper Limit, which for the 2015/16 salary cap of 71.4M works out to a 5.355M maximum. The combined bonuses for Nurse (0.85M), Reinhart (2.35M), Draisaitl (2.475M), Klefbom (0.35M), and McDavid, not signed yet, but assuming a max deal (2.85M) total 8.875M.  So what does that mean?  In a nutshell, should the Oilers start the year with all five of those players on the roster, the team will have an effective salary cap of 67.88M in order to preserve the required room for bonuses.1

 A few thoughts:

  • The impact this has on Edmonton's summer plans is hard to know, but it may have repercussions for free agent spending.
  • This is a not really an issue if both Reinhart and Draisaitl are in the minors, as the remaining bonuses wouldn't exceed the overage.  If one of them is in the minors at any given time, the Oilers would exceed the overage maximum, but only by about 1M instead of ~3.5M if both are in the NHL.
  • We don't know exactly what Marincin will cost, but for the sake of argument let's say he signs a one year deal for the same money as Reinhart.  In comparing the cap hits head to head, we might ordinarily say they cost the same, while noting that Reinhart has bonuses available that could result in a higher cap hit for the current year if Edmonton were not at the cap, or a cap penalty the following year, if achieved, were the Oilers at the cap - the overage talked about earlier.  However, assuming Edmonton would have already used all their overage room on the other four players, Reinhart carries an effective cap hit of the combined 3.21M vs. the 0.86M of Marincin. That is not the case if Draisaitl and Nurse, for example, are in the AHL - only if the bonus overage has already been exceeded.
  • There is a consideration for Draisaitl that does not exist for Reinhart.  If Edmonton leaves either Reinhart or Draisaitl in the AHL all year, an ELC year would be burned.  However, with Draisaitl, a year in the AHL vs. a year in the NHL results in him being a UFA in 2023 instead of 2022; Reinhart's UFA status is not impacted by whether or not he plays in the NHL.  When you combine that with Draisaitl having an effective cap hit of 3.4M (again, assuming the bonus overage is already maxed out), is it that hard to argue that Edmonton would be better off to sign a UFA W for 2.5M, save some cap space, save a year towards UFA status for Draisaitl, and let him play a full year as the #1C in the AHL?
  • For 2016/17, the Oilers would need to remain 3.17M under the cap2 once Klefbom's bonuses are off the books, with the potential for a bigger number if other players with bonuses were to crack the roster (for example, Slepyshev).

I don't want to get too far into the weeds here, regarding things like LTIR consequences and "impossible to earn" bonuses - perhaps that will be something to look at as the summer progresses and we get a better sense of any UFA's EDM has added, any trades/buy-outs, the contracts/cap numbers of any RFA's. But the quick takeaway is that the Oilers may not have as much money to spend in free agency as some might have hoped, or been expecting, depending on the number of players with significant ELC bonuses on the roster.

1 The calculations, to the dollar, are pretty complicated and beyond the scope of this article, but what it means, more or less, is that EDM has to stay at least 3.52M below the cap this year if all these players are on the roster.

2 This assumes that the 2016/17 cap is identical to the 2015/16 cap.  If the cap increases, so does the size of the bonus cushion.

 

Saturday, July 06, 2013

Front-Loading Ference's Contract?

The structure of Ference's contract has yet to be released, but I would not be surprised to discover that the Oilers frontloaded the contract to the fullest extent possible, so as to increase Ference's "tradeability" in the later years, should they so desire.  If everything goes to plan three years from now, both Klefbom and Nurse will be in the NHL, and along with Smid still under contract, it very well could be the case that Ference would fit outside Edmonton's top 6D.  In that case, front-loading Ference's contract could increase his appeal to an acquiring team for the 2016/17 season.

Wednesday, June 26, 2013

Trading Down From The 7th Overall Pick


Moving down in the draft is viewed with trepidation by some Oilers fans, probably largely related to the Parise/Pouliot move at the 2003 draft. I would argue that trading back can be a reasonable way to extract value, particularly when the player a team likes, and would select at their original position, would still be available at a later position.  But given that this is the last time (hopefully) in a while for Edmonton to select a player with a somewhat high probability of being a cornerstone player, it makes sense to me that the Oilers use that opportunity to select whomever of Monahan, Lindholm, or Nichushkin remains.  They already have two 2nd round picks to build depth within the system, and if they feel they need even more depth, they could always trade down next year at a time where they are less likely to be giving up an impact player by doing so (assuming they draft 10th-18th or so next season).

Tuesday, May 28, 2013

If Colorado Is Willing To Trade The #1 Overall Pick, How About This?

There has been a bit of chatter today hinting that the Avalanche may be willing to move their 1st overall pick.  Who knows how seriously they might look at that option, but if they do, I wonder if they might consider the following deal:

Monday, May 27, 2013

Trading Up From The 7th Overall Pick

Not unlike the build up to most Entry Drafts, it seems as though many Oilers fans are clamoring for the team's management to trade up.  The only time I can remember the Oilers trading up in the first round was the 2007 draft, when Edmonton traded the 30th (Nick Ross) and 36th (Joel Gistedt) picks to Phoenix in exchange for the 21st pick (Riley Nash).  Even though the Oilers haven't moved up all that often in the past, I do think it's reasonable to wonder if Edmonton's at least a little more likely to move up this year based on one of GM MacTavish's answers regarding the upcoming 7th overall pick, given during a season ticket holder's conference call (transcription from that conference call courtesy Dan Tencer).
Our wish list in the draft would be to draft a centerman and/or a defenseman with that pick in that area. The higher end centermen, not to divulge too much about where we're ranking players, but if you look at the public rankings like Red Line or Central Scouting, there are really three very high end centermen available in this draft. Nathan MacKinnon from Halifax, Monahan from Ottawa and also Barkov, who played in the Finnish men's league. I think that those three centermen, relative to some of the public rankings, we would finish just out of the realm of getting one of those three centermen if we didn't move up.

Friday, May 17, 2013

Valeri Nichushkin

Like many Oilers fans, I was checking the reverse standings daily near the end of the season to see where the Oilers might be slotted to pick in the 2013 Entry Draft.  At the conclusion of the season (and after the lottery had no impact on Edmonton's selection), the Oilers were slated to choose 7th, a rather fortunate position in my mind since many observers of the draft, myself included, have surmised there to be a tier of 7 prospects at the top of this year's draft.  Well, "a tier" is probably the wrong way to put it; most seem to have it organized as a group of 3 followed by another group of 4, or 4/5 players followed by 3/2 players.  That group of 7 includes Jones, Drouin, and MacKinnon, who are generally seen as the top 3, followed by some order of C Barkov, C Monahan, C/W Lindholm, and W Nichushkin*.  In any case, picking 7th assures that Edmonton will receive one of the players in this "top tier", should they view the draft in the same manner.  I would argue that the most likely group of players to be selected in the top 6 is Jones, Drouin, MacKinnon, Barkov, Lindholm and Monahan.  That isn't to be confused with a guess that it's more likely than not those 6 players will in fact be the first 6 drafted - maybe they will be, or maybe they won't, I'm only guessing the aforementioned group of 6 players more likely to be the first selected than any other single group of 6 players.  I would be a bit surprised to see another player crack the top 6, but at the same time it isn't unusual to see a surprise or two near the top of the draft, like Hickey in 2007, or Fowler, Couturier, and Forsberg sliding in 2010, 2011, and 2012, respectively.  If that group of 6 is in fact selected as the top 6, it would leave Nichushkin for the Oilers**.  The problem, if you want to call it that, is that some of the circumstances surrounding both the Oilers and Nichushkin might conspire to move him down Edmonton's list.  I'm going to attempt to make the case that, in spite of those potential pitfalls, it would be in Edmonton's best interest to draft Nichushkin if he is the player left available from that group of seven, "warts" and all.