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NHL - can someone explain these contract buy-outs?


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I just read another article about an NHL team buying out a contract of a player:

http://news.yahoo.com/s/ap/20050730/ap_on_...HNlYwMlJVRPUCUl

I don't understand how this thing works. I was hoping someone could explain it to me.

When they buy out a players contract, it includes the 24% rollback, right? So does that mean that the team has to pay 76% of the value of the contract when it buys out, or do they get away with paying less than that?

Thank you.

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im not too sure about the specifics of the 'buy out'. But some players who are contractually obligated to play for a team can be released from the contract if the team pays 1/3 (or 2/3?) of that players salary. The player is then released and is eligeble to play for any other team that wants to sign the player except the team they were bought out by. All of this is to allow some more room for teams that need to adjust to the new salary cap.

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i don't really get it either. it just seems like we are going to have a bunch of superstars that won't have a team because they are worth too much.

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My interpretation is that existing contracts were rolled-back 24% but then teams can buy them out for 2/3rds of the new amount.

i.e. $7.5 million becomes $6 million but then they get bought out for $4 million.

What is crucial is that the $4 million doesn't count against the cap. Sure, it may be wasted money but at least it doesn't harm your on-ice product.

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Don't suppose anyone has a link to something semi-official that explains things, do they?

Also, is this Buy Out thing only allowed this season, or is it every season from now on?

Thanks.

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i also find it will create more even match-ups. We wont have teams like Colorado, Detroit, Philly, Toronto always on top because they have some of the highest salary expenditures. This way, all teams can spend a max of 39mill. While teams with less quality players can sign these bought out players for a relatively cheaper price creating a more even matchup between all teams.

Edited by bayrider
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i also find it will create more even match-ups. We wont have  teams like Colorado, Detroit, Philly, Toronto always on top because they have some of the highest salary expenditures. This way, all teams can spend a max of 39mill. While teams with less quality players can sign these bought out players for a relatively cheaper price creating a more even matchup between all teams.

I don't much mind a salary cap I guess.

But I would want all the contracts to be guaranteed, unlike the NFL, because the players deserve that. I also feel bad existing contracts had to be rolled back. If you were promised the money in a contract that was struck before this bargaining agreement, I think you should get paid that full amount.

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Bearded Kirklander to answer ur previous post... i think mine and Fred's explanations pretty much sum it up. Also this buy-out thing is only for 6days betwen Jul23-29 and is only for this year. Free agency starts Aug 1 when most of these bought out players will end up being signed elsewhere. The entire buyout is so that teams that have high payrolls like Toronto which exceeds $60mil will have to adjust to the new $39m cap. The buyouts don't count towards the cap.

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Bearded Kirklander to answer ur previous post... i think mine and Fred's explanations pretty much sum it up. Also this buy-out thing is only for 6days betwen Jul23-29 and is only for this year. Free agency starts Aug 1 when most of these bought out players will end up being signed elsewhere. The entire buyout is so that teams that have high payrolls like Toronto which exceeds $60mil will have to adjust to the new $39m cap. The buyouts don't count towards the cap.

Thanks for the clarification. I'm glad the buyout thing was for such a limited time. I'd hate to see players get shafted for all 6 years of the contract.

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how willing are these big name guys gonna be to sign a new contract worth a fraction of what they were getting before? i guess we'll see who really loves hockey...

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how willing are these big name guys gonna be to sign a new contract worth a fraction of what they were getting before?  i guess we'll see who really loves hockey...

It looks as though they are not going to have a choice.

Just seems unfair to be forced to take a cut over what your contract promised is all - at least to me.

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It looks as though they are not going to have a choice.

Just seems unfair to be forced to take a cut over what your contract promised is all - at least to me.

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A player that used to make $7.5 million that gets bought out and if forced to sign for only two million isn't exactly going to suffer.

i.e. $7.5 million becomes $6 million but then they get bought out for $4 million.

Remember their $2 million person would be in addition to the $4 million they collect from the buy out. The net result is that the player gets the same $6 million as if they were not bought out. The player doesn't lose.

Sure the first team is out some money (pay your former player $4 million to go play for another team) but so long as it doesn't count against the cap then it is all good. This was needed so that the teams with a $60 million dollar payroll can meet the new cap.

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Just as a clarification, the buyout price is 2/3 of whatever is left on the contract. A contract is worth say 25 million for the next 4 years, they'll pay 2/3 of that 25mil (after the 24%), not just the amount the player was set to earn this coming year.

And yes, contracts are for the most part guaranteed (with SOME team, even if they're traded, the contract goes with them). However, part of ratifying this new CBA was to agree to the 24% rollback as well as putting in the 2/3 buyout clause.

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Just as a clarification, the buyout price is 2/3 of whatever is left on the contract.  A contract is worth say 25 million for the next 4 years, they'll pay 2/3 of that 25mil (after the 24%), not just the  amount the player was set to earn this coming year.

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Yea, I didn't want to get too complicated. Just double my example numbers if there was two years left on the contract.

Still it works out.

Someone with two years left who goes from $7.5 million to $2 million (who would have been rolled back to $6 million anyway).

They get a buyout of $8 million. Then they go and play with a new team for $2 million a season. It still works out to an average of $6 million per season ($12M / 2 years) although they'd get $10 million the first year and two million the next. Many people would rather have the money up-front anyway. I don't really see how the bought out players lose.

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Bought out players lose because they were guaranteed the money from the previous collective bargaining agreement and they get less than they were promised. Seems simple enough to me.

If someone promised to buy your house for $500,000 but the bank changed rules after the deal had been signed and they only have to pay you $300,000, that would be kind of unfair, no?

Just because they are talking millions instead of thousands doesn't mean they deserve to lose that previously guaranteed money. Just because they are rich doesn't mean they deserve to get the shaft "because they can afford it", after all.

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Bought out players lose because they were guaranteed the money from the previous collective bargaining agreement and they get less than they were promised.  Seems simple enough to me.

If someone promised to buy your house for $500,000 but the bank changed rules after the deal had been signed and they only have to pay you $300,000, that would be kind of unfair, no?

Just because they are talking millions instead of thousands doesn't mean they deserve to lose that previously guaranteed money.  Just because they are rich doesn't mean they deserve to get the shaft "because they can afford it", after all.

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I don't think you understood my math.

If they were making $7.5 million then they were destined to make $6 million (regardless of the buyout).

If the player was bought out then they'd receive $4 million. If the sign with another team for only $2 million then they haven't lost a cent.

The buyout could actually work in the player's favour if it was a multi-year deal (since they get the bulk of the money up front).

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If someone promised to buy your house for $500,000 but the bank changed rules after the deal had been signed and they only have to pay you $300,000, that would be kind of unfair, no?

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How is this different than when players would hold out even though they had signed contracts?

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lets just be happy there'll be a season ;)

now we can see why they had such a hard time settling this. both sides are gonna be selfish.

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If a contract gets bought out, that player can't resign with the same team for next year. I wonder if that player can be sign with another team and get traded to the team that bought out his contract.

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If a contract gets bought out, that player can't resign with the same team for next year.  I wonder if that player can be sign with another team and get traded to the team that bought out his contract.

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A team would not trade for a guy where there was a perception of animosity.

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i also find it will create more even match-ups. We wont have  teams like Colorado, Detroit, Philly, Toronto always on top because they have some of the highest salary expenditures. This way, all teams can spend a max of 39mill. While teams with less quality players can sign these bought out players for a relatively cheaper price creating a more even matchup between all teams.

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I dont know where you got Toronto from. Man I would like to see a cup that long overdue come out way soon.

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I dont know where you got Toronto from. Man I would like to see a cup that long overdue come out way soon.

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Toronto (in the last decade) got slightly more value than the Rangers but that is about it.

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How is this different than when players would hold out even though they had signed contracts?

I don't agree with players holding out either. :)

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I don't think you understood my math.

If they were making $7.5 million then they were destined to make $6 million (regardless of the buyout).

If the player was bought out then they'd receive $4 million.  If the sign with another team for only $2 million then they haven't lost a cent.

The buyout could actually work in the player's favour if it was a multi-year deal (since they get the bulk of the money up front).

What if they don't get picked up with another team for $2 million?
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What if they don't get picked up with another team for $2 million?

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I don't think there would be too many examples of players that were worth $7.5 million per season before the lockout that are suddenly worthless now.

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