Wednesday, June 25, 2014

Marian Gaborik's contract could net Kings 5-20% cap savings

The news just came out that Marian Gaborik has signed a 7-year, $4.875m AAV contract extension with the Kings. He's 32 years old now, and will be 39 by contract's end. There's a good chance he'll be retired before it's over.

If the Kings are smart (they are), they're structure the deal as front-loaded, as follows:

Years 1-3: $6,500,000
Year 4: $4,875,000
Years 5-7: $3,250,000

This is, as far as I can tell, the most front-loaded, cap-friendly structure the CBA allows. It allows for the possibility that Gaborik may retire before the contract's up, without causing any cap recapture.

If Gaborik retires after 5 years (age 37), the Kings will have paid him a little over $27.6m for 5 years - a true AAV of $5.525 million, yet they'll only face a $4.875m cap hit. If he retires in just 4 years, that AAV is $6.09m; if he sticks out 6 years, it's a $5.146m AAV.

Regardless, the proper salary structure in this case will allow the Kings to get a cap discount of 5-20%. That's a pretty hefty advantage.

This will be something that any team can take advantage of for star players that are in their early 30s. Just as before with the long-tail contracts, you can get a cap savings by including years where they're likely to be retired. The savings isn't as large as it once was, but it's still substantial.

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edit: the original version of this post had some calculation errors, which have been fixed.