Fun With Salary Cap Advantage Recapture – Christian Ehrhoff Edition.

In the weeks leading up to the recent NHL trade deadline, Buffalo Sabres defenseman Christian Ehrhoff was frequently mentioned as a possible trade candidate. Indeed, the week before deadline day, the Sabres requested he submit a list of eight teams to which he wouldn’t accept a trade.

The deadline passed with Ehrhoff still a member of the Sabres, but it’s possible this season could be his last in Buffalo. Following the deadline, Sabres GM Tim Murray told The Buffalo News he wasn’t finished making changes to his roster. Murray didn’t single out anyone, but Ehrhoff could be among those changes this summer.

If the Sabres trade Christian Ehrhoff, it could still prove costly to their salary cap.

If the Sabres trade Christian Ehrhoff, it could still prove costly to their salary cap.

In July 2011 Ehrhoff inked a 10-year, $40 million contract with the Sabres. The deal was heavily front-loaded, paying out $22 million of the $40 million in the first three seasons, allowing the Sabres a cap-friendly annual average salary of $4 million. The deal also comes with a clause preventing him from being demoted to the minors plus a modified no-trade clause.

Assuming the Sabres put Ehrhoff on the trade block this summer it’s believed there could be considerable interest in the 31-year-old puck-moving blueliner. In the days leading up to the trade deadline Ehrhoff was frequently linked to the Detroit Red Wings.

If Ehrhoff is traded, however, he’s among a handful of players who fall under the league’s salary-cap advantage recapture rules in the current CBA.

Assuming Ehrhoff is traded to the Red Wings this summer, the Sabres will be penalized if he retires before his contract expires in 2021. The severity depends upon which season he retires. For example, if he retires in the summer of 2015, the Sabres get tagged for $1.666 million per season against their cap over the remaining tenure of his contract.

If he retires in 2016, it’s $2 million per season. In 2017, it’s $2.5 million per. In 2018, over $3.333 million. In 2019, $5 million. The worst penalty comes if he retires in 2020 before the completion of the final year of his contract. For 2020-21, the Sabres would be penalized a whopping $10 million against their cap. Even with the anticipated annual increases to the NHL cap ceiling, that’s still a huge bite out of the Sabres’ payroll.

As for the Red Wings, they wouldn’t be penalized by Ehrhoff’s retirement in any of the aforementioned years. Combined with his annual $4 million cap hit, that could provide additional incentive for the Wings to pursue him this summer.

This doesn’t mean Murray won’t trade Ehrhoff out of fear a potential early retirement could come back to haunt his team. It’s merely to illustrate how the actions of Murray’s predecessor could still come back to bite the Sabres in the wallet down the road.

4 Comments

  1. According to the capgeek.com recapture calculator the cap benefit drops significantly in the last couple of years for Ehrhoff so if he retired in 2020 it’d only be a $3M recapture penalty.

    • Patrick, my figures are linked to CapGeek.com’s cap recapture calculator for each season.According to their calculator, the figure goes up, not down, if he retires in the final couple of years of his contract.

      • There are two components here—buy out and recapture

        recapture is all on Buffalo where they paid him $10m up front.

        With Luongo Florida will have a recapture amount as well because cap hit < actual salary the next few years

        buy out is 2/3 the amoutn owed on the contract.

        2016 (5 yrs left) $10M owed buy out is $666,666 each over 10 years
        2017 (4 yrs left) $6M owed buy out is $500,000 each over 8 years
        2018 (3 yrs left) $3M owed buy out is $333,333 each over 6 years
        2019 (2 yrs left) $2M owed buy out is $333,333 each over 4 years
        2020 (1 yrs left) $1m owed buy out is $333,333 each over 2 years

        recapture on buffalo if not traded

        2016 (5 yrs left) $10M owed $0M, $1M, $3M,$3M, $3M
        2017 (4 yrs left) $10M owed $1M, $3M,$3M, $3M
        2018 (3 yrs left) $9M owed $3M,$3M, $3M
        2019 (2 yrs left) $6M owed $3M, $3M
        2020 (1 yrs left) $3m owed $3M

        if traded—trading him back to Buffalo does not change this–new team buys him out or he retires in:

        2016 (5 yrs left) $10M owed $2M per
        2017 (4 yrs left) $10M owed $2.5M per
        2018 (3 yrs left) $10M owed $3.33M per
        2019 (2 yrs left) $10M owed $5M per
        2020 (1 yrs left) $10m owed $10M in one year

        In a deal if buffalo opts to retain 50% of his salary they retain 50% of the recapture amount. the $10M in the final year is reduced to $6.5M

        This can make it more manageable because if Buffalo internally has a $4M dead hole in their salary cap where the 50% is held then if the disater scenario happens of $10M recapture in one year it only effectively is a $2.5M cap hit because of 50% retained lowers it to $5.5M and the $4M in dead space lowers it to $2.5M which make it far easier to handle.

        If they trade him another thing they can do is force the team to buy him out by 2018 if he doesnt retire….how…by puting a clause in the contract that states:

        If he is on the roster on July 1, 20-18 or is traded before that date then the new team compensates Buffalo with their 1st round pick in 2019. If this happens again in 2019 then their 1st in 2020 goes to Buffalo.

        This turns the contract into:

        4 yrs for $15M with a $2M buy out or a 3 yr $12M contract with a $4M buy out.

        This will force them to buy him out by July 1 2018 at $2m over 6 years or $333,333 each year.

        Buffalo can cover this by retaining salary of about 25% or $1M per year/ As far as I can tell Buffalo would absorb yjr ds,r % part of the buy out amount they retained.

        • Good points regarding salary retention. For the sake of my piece I didn’t bother to include that option but it is worth acknowledging that possibility.

          One flaw, however, is your suggestion of the Sabres inserting a clause into Ehrhoff’s contract “forcing” a team to buy him out in 2018. NHL contracts are fully binding and cannot be amended.