[Signing] Canes sign Jarvis to 8 yr ext worth $63.2 million with a rare 9th year deferred bonus

[Groot]

Originally Posted by Paulie Walnuts

His contract is going to be huge. 120M deal most likely. No way he gives up a large chunk of that for a 9th year payment.

This is rare. Most players want most of the money right away. He also doesn’t seem like the type of guy to do this.

I think he wants his money, and he’s going to get it.

I don't know about $120 but he will get paid and I agree, I can't see him deferring large amounts. And if he was going to do so, he could do that with any team.

Jarvis deferred $15.67 million by days. To get to even near a million in AAV savings, Draisatl would have to defer more than double that for years.

Just sharing the link so people can see that this isn't some huge issue that is going to open up huge chunks of cap space.

[Jay Random]

Originally Posted by Enoch Root

You keep missing the point (and actually arguing against yourself)

The issue here is not the time value of the contract. It is the fact that, because the contract is deferred beyond the 8 year max, it is allowed to NPV the future payments. NO CONTRACT OF 8 YEARS OR LESS CAN DO THIS.

As a result, the cap hit is less. Adding the one day beyond 8 years allows for the cap hit to be reduced.

In all contracts of 8 years or less, payment is made at the time that service is delivered. You get paid in year 1 for your play in year 1, and in year 8 for your play in year 8. The present value of each dollar paid is $1 at the time when the corresponding service is performed.

Jarvis's contract pays him in year 9 for his work in years 1, 2, and 7. Specific amounts are being deferred to a specific date, and the present value of those deferred dollars is less than $1 each.

[Jay Random]

Originally Posted by Enoch Root

Jesus Christ. I can't explain it to you again. I am done with you.

You didn't explain it the first time, because you don't understand the thing you are trying to explain.

Originally Posted by Groot

Jarvis deferred $15.67 million by days.

No. Jarvis is deferring payment due to him in years 1, 2, and 7 of the contract specifically. He is waiting seven extra years to get the full amount of his first year's pay; 6 years for the 2nd; 1 extra year for the 7th.

If you promised to pay me eight years from now for work I do today, you had damned well better be paying me interest on the amount.

[All In Good Time]

The PA should be all over this. Since the extra money isn’t counted in cap calculations, it most likely isn’t factored into the PAs portion of the HRR.
Therefore if every contract did this (saved 5% on the AAV) in a year that the cap is 88M, an extra 140M would theoretically be made available to the membership

[Paulie Walnuts]

Originally Posted by Groot

I don't know about $120 but he will get paid and I agree, I can't see him deferring large amounts. And if he was going to do so, he could do that with any team.

Jarvis deferred $15.67 million by days. To get to even near a million in AAV savings, Draisatl would have to defer more than double that for years.

Just sharing the link so people can see that this isn't some huge issue that is going to open up huge chunks of cap space.

I was using 120 based off his ask being north of 14M. Hopefully he keeps asking for more lol and large singing bonuses.

With 2 years left on the CBA I could actually see him doing the opposite and wanting larger bonuses for the first 2 years of the deal.

[Paulie Walnuts]

Originally Posted by Jay Random

You didn't explain it the first time, because you don't understand the thing you are trying to explain.



No. Jarvis is deferring payment due to him in years 1, 2, and 7 of the contract specifically. He is waiting seven extra years to get the full amount of his first year's pay; 6 years for the 2nd; 1 extra year for the 7th.

If you promised to pay me eight years from now for work I do today, you had damned well better be paying me interest on the amount.

Sorry the last point. Maybe I missed and it’s what I’m interested in. Are they paying him interest on that money ?

[GGG]

Originally Posted by Groot

In scenario 2 as you presented it, the deferred payments earn interest and as such are counted in full against the cap. Scenario 2 as presented would carry an AAV of $11.788/year.

If they don't earn interest, then a portion of the differed amount as calculated by current fair market value which is 1-year LIBOR rate (now SOFR rate) plus 1.25% counts against the cap.

If Draisatl signed an 8-year contract for $115 million and deferred $33 million they could maybe save $1 million per year AAV

https://puckpedia.com/deferred

I was calculating the value of the future payment using LIBOR+1.25 for some reason puckledia is using 5.5.

https://puckpedia.com/salary-cap/deferred

The above is what I did I just calculated using the equivalent NPV to the player rather than the same total compensation. As NPV to the player vs cap hit is what matters in this discussion.

In your example with Dry you have given Dry a lower NPV. So it makes sense if he takes a lower NPV there is a lower cap hit.

[Jay Random]

Originally Posted by Paulie Walnuts

Sorry the last point. Maybe I missed and it’s what I’m interested in. Are they paying him interest on that money ?

They're paying him the stated amount in the contract. He earns the first chunk of it this year, but the Hurricanes don't pay him for 8 more years, and they, the team, keep the interest in the meantime.

The cap hit is based on how much money they would have to put away each year for the principal + interest to meet the deferred payment in year 9.

[Paulie Walnuts]

I did 120M for 8 years and deferred 30M and it only gave a cap savings of 450K a year.

That’s a lot of money. No wonder it’s not used. It makes no sense for the player to defer so much, it makes little difference to the cap and the owner has a 30M bill for guy that won’t be on your team.

[Paulie Walnuts]

Originally Posted by Jay Random

They're paying him the stated amount in the contract. He earns the first chunk of it this year, but the Hurricanes don't pay him for 8 more years, and they, the team, keep the interest in the meantime.

The cap hit is based on how much money they would have to put away each year for the principal + interest to meet the deferred payment in year 9.

Hm maybe I wasn’t understanding. They have to pay him the 15M or whatever it is plus interested earned on that money?

[GGG]

Originally Posted by topfiverecords

You’re fixated on fair. That’s not what happened here.

Well yes.

Because the only possible way for a cap hit advantage to be gained while keeping the player whole is for the LIBOR plus 1.25 to give a rate of return that is more attractive to the player than straight cash.

Otherwise if we agree the discount rate in the CBA is fair then every deferred comp contract can be expressed as a regular contract with the identical cap hit and NPV

Show the contract year by year with deferral that preserves the players NPV and reduces cap hit.

[Groot]

Originally Posted by Jay Random

You didn't explain it the first time, because you don't understand the thing you are trying to explain.



No. Jarvis is deferring payment due to him in years 1, 2, and 7 of the contract specifically. He is waiting seven extra years to get the full amount of his first year's pay; 6 years for the 2nd; 1 extra year for the 7th.

If you promised to pay me eight years from now for work I do today, you had damned well better be paying me interest on the amount.

I was saying days simply in the sense that he will have collected all the cash for his contract days after the end of the last season of his contract. Not years later like was proposed for Draisatl.

And you're right, I'd be asking for interest but that would negate any cap savings

[GGG]

Originally Posted by Groot

I was saying days simply in the sense that he will have collected all the cash for his contract days after the end of the last season of his contract. Not years later like was proposed for Draisatl.

And you're right, I'd be asking for interest but that would negate any cap savings

That’s the point, there is no cap savings if NPV to the player is preserved.

[topfiverecords]

Originally Posted by GGG

Well yes.

Because the only possible way for a cap hit advantage to be gained while keeping the player whole is for the LIBOR plus 1.25 to give a rate of return that is more attractive to the player than straight cash.

Otherwise if we agree the discount rate in the CBA is fair then every deferred comp contract can be expressed as a regular contract with the identical cap hit and NPV

Show the contract year by year with deferral that preserves the players NPV and reduces cap hit.

The player wasn’t kept whole though, that’s the point. He took more money later, but not enough more. He left money on the table to reduce the cap hit, and this allows Carolina to compensate him somewhat for it out of future cash.

[PepsiFree]

Originally Posted by Paulie Walnuts

I did 120M for 8 years and deferred 30M and it only gave a cap savings of 450K a year.

That’s a lot of money. No wonder it’s not used. It makes no sense for the player to defer so much, it makes little difference to the cap and the owner has a 30M bill for guy that won’t be on your team.

It’s literally just a way for owners to buy cap space. The players get paid more in real money, the cap hit goes down. People are trying to over complicate it, but that’s what it is, that’s what it’s for, and that why anyone would agree to it.

Look at Ohtani. He was rumoured to be getting around 500-600 million. He is going to end up getting 700 by deferring 680, while still counting as 46m (the highest in the MLB) against the team salary.

So, to save 4-14m per year, the Dodgers have to pay him an additional 24m. And almost all of it when the contract is over.

These schemes only work when the team agrees to pay the player more than they would otherwise get without deferment (in value, not dollars, since some are struggling) and even then there is a point where it won’t make sense for one party or the other because the amount of deferment required to have a significant impact on the cap is significant itself.

[topfiverecords]

Originally Posted by PepsiFree

It’s literally just a way for owners to buy cap space. The players get paid more in real money, the cap hit goes down. People are trying to over complicate it, but that’s what it is, that’s what it’s for, and that why anyone would agree to it.

Look at Ohtani. He was rumoured to be getting around 500-600 million. He is going to end up getting 700 by deferring 680, while still counting as 46m (the highest in the MLB) against the team salary.

So, to save 4-14m per year, the Dodgers have to pay him an additional 24m. And almost all of it when the contract is over.

These schemes only work when the team agrees to pay the player more than they would otherwise get without deferment (in value, not dollars, since some are struggling) and even then there is a point where it won’t make sense for one party or the other because the amount of deferment required to have a significant impact on the cap is significant itself.

You should probably ELI5 that.

[GGG]

Originally Posted by topfiverecords

The player wasn’t kept whole though, that’s the point. He took more money later, but not enough more. He left money on the table to reduce the cap hit, and this allows Carolina to compensate him somewhat for it out of future cash.

Yes they compensate him less than if he got the money upfront meaning he got less value from his contract meaning the NPV of his Salary in the year of the deferre comp was lower. Therefore the cap is lowered as well.

There is no free money here unless you think the LIBOR plus 1.25 is an awesome investment vehicle.

[The Cobra]

Originally Posted by Groot

I was saying days simply in the sense that he will have collected all the cash for his contract days after the end of the last season of his contract. Not years later like was proposed for Draisatl.

And you're right, I'd be asking for interest but that would negate any cap savings

He effectively does get interest. If he wanted a straight usual deal of 8 years with equal payments, they would give him about $60M. They agreed to pay him $63.2M due to the deferred payments, as that amount equates tot he NPV value considering the deferred payments.

Yes, he collects all of his money a day after the contract ends, but he's deferred lots of money from years 1 and 2, so he gets that money 8 and 7 years later.

[topfiverecords]

Originally Posted by GGG

Yes they compensate him less than if he got the money upfront meaning he got less value from his contract meaning the NPV of his Salary in the year of the deferre comp was lower. Therefore the cap is lowered as well.

There is no free money here unless you think the LIBOR plus 1.25 is an awesome investment vehicle.

And again, there is zero way of us knowing what the contract would have looked like without the deferred amount. You can’t assume it would be the NPV of this deal divided by 8, so therefore you can’t judge whether he did or did not in fact do better or did or did not in fact do worse.

The calculation of this exact contract amount both ways is determining a cap reduction relative to itself, not relative to what the other contract would have been. The other deal would have panned out differently. But we’ll never know. We weren’t involved in negotiations. So did he really actually get slightly more money in the end than just going straight 8…

[PepsiFree]

Originally Posted by The Cobra

He effectively does get interest. If he wanted a straight usual deal of 8 years with equal payments, they would give him about $60M. They agreed to pay him $63.2M due to the deferred payments, as that amount equates tot he NPV value considering the deferred payments.

Yes, he collects all of his money a day after the contract ends, but he's deferred lots of money from years 1 and 2, so he gets that money 8 and 7 years later.

lol, no, he does not effectively get interest. There is zero way of knowing what his ask was. The $60M is completely arbitrary outside of how the cap hit is calculated.

We don’t know how much more he got vs not deferring, if anything.

If anything, your scenario is the least likely.