A look at Lou Lamoriello's Islanders friendly contract structures
Lou Lamoriello has quietly ensured that the New York Islanders' largest Unrestricted Free Agent contracts won't come back to bite them
Here’s the deal. Lou Lamoriello has quietly been handing out contracts that are amazing deals for the New York Islanders and no one is talking about it.
This article takes a look at the contract structures that Lamoriello has handed Islanders unrestricted free agents since he joined.
With a few notably exceptions (such as elite first-line winger Leo Komarov) the contracts have all been similarly structured in a way to ensure a future general manager doesn’t inherit a massive cap headache.
What are you talking about, LowAttendance, I hear you say. Lamoriello fills the Islanders cap with over-priced veteran players.
The thing is that over-priced veterans don’t fuck up a team’s cap. Over-priced veterans who aren’t playing to their contract value do.
Two trips to the Eastern Conference Final is a row is enough to tell you that Lamoriello still has it.
What he also has is a team where the veteran players can be swiftly moved on from if they start under-performing late in their contracts.
For every big* contract Lamoriello has handed out on Long Island, he has protected the Islanders on the back-end of the deals by ensuring the option of a buy-out is always a feasible one (unlike say the Andrew Ladd contract).
Lou has done this by structuring contracts so that the signing bonus is paid upfront, where more than 50% of the salary is paid in the first half of the contract. Each big* contract has a single $2 million signing bonus in the first year (Anders Lee has a $3 million bonus).
It all adds up to a contract where, in the situation that a veteran is no longer-performing, the option for a buyout or trade is always on the table.
*To date, the contracts I deem big are: Anders Lee; Semyon Varlarmov; Jordan Eberle; Brock Nelson; and, Jean-Gabriel Pageau.
Players v Contracts
The focus of this article is the contract. Every player can be on a contract that could be considered good or bad value for a team, based on their performance.
Unrestricted free-agent (UFA) contracts are based on past performance, with the hope it continues in the future. Every team has an example of a contract that doesn’t work out for whatever reason.
While players may have great moments, when teams sign a UFA they’re expecting great seasons consistently.
For the context of this discussion today, we’re assuming teams view a player and their contract in one of two states:
The player is contributing to the success of the team and is living up to the value of the contract
The player is not contributing to the success of the team and it is desirable to be rid of the contract
Finally, to be clear, the purpose of this article is not to attack players, merely to make objective comments about how their individual contract affects a team’s salary cap situation.
How are Lou’s deal structured?
While all of the big* deals differ in terms of Average Annual Value (AAV) and length, they all share two important traits.
*To date, the contracts I deem big are: Anders Lee; Semyon Varlarmov; Jordan Eberle; Brock Nelson; and, Jean-Gabriel Pageau.
The first trait is that the signing bonus of all those contracts was $2 million in the first year of the deal (Anders Lee got $3M). That’s it.
The second trait is that most of the salary is paid over the first half of the deal.
The effects of these traits are examined further below.
To summarise the benefit of structuring these long-term deals like this: at the tail-end of these big free agent deals, the Isles can buy-out these contracts or perform a hockey trade to another team (rather than a cap dump trade) if needed to free up cap room.
(Since I initially wrote this article, they also re-signed Matt Martin. 4 years, $800K signing bonus in the first year - I expect Casey Cizikas to receive a similar deal, though with a bigger signing bonus).
Signing bonuses limit buy-out potential
As always, CapFriendly has a great section describing how buy-outs work.
The short of it is that signing bonuses in the back end of contracts effectively restrict or eliminate a team’s ability to buy-out a player.
Most Isles fans are likely aware of Andrew Ladd’s contract for example. With $3M signing bonuses in each of the final three seasons, the savings from a buy-out are less than just stashing him in the AHL.
Signing bonus must be paid in full, alongside any remaining salary, although the salary is discounted (in most situations) by 2/3. A lower salary in the back-end of a contract also maximises salary cap relief.
The ideal team scenario where signing bonuses are involved is having them at the start of the contract - which is exactly what Lou has done.
How do Lou’s deals compare to similar contracts?
For this exercise, I’ve isolated four similar contracts to compare: Anders Lee; Clayton Keller (Arizona Coyotes); Jacob Trouba ((fuck the) New York Rangers); and, Matt Duchene (Nashville Predators).
Here is an overview of their contracts.
I picked these three players because they all signed contracts of similar total value and contract length during the 2019 free agency period.
Trouba and Duchene both signed 7 year deals , while Keller signed an 8 year deal. They all have a similar cap hit, though Lee’s is the lowest.
Assumption
For these contracts, we are imagining a scenario where the team wants to shed the contract because the player isn’t living up to the value of the contract. This is purely hypothetical.
Also to note: the purpose of this exercise is not to compare output or position played. Trouba is a D-man, the others are forwards. We’re looking purely at the value of their contracts in a scenario where the contract is a burden.
With that said, here is what I am looking at:
salary
term
boolean question of whether their team wants to keep them or not
Clayton Keller
Keller’s contract is buyout proof.
In the early years of the contract, his salary is low, with 2 bonuses of $3 million each. He has no clauses restricting movement of the contract until the 5th year. If Arizona wants out of this contract, it has to be sooner rather than later.
It is the back-end of the contract that is problematic for Arizona (should they wish to be rid of it). In that 5th season, a full no-trade clause (NTC) kicks in, before in the 7th year, a no-movement clause (NMC) kicks in. Just ask St Louis general manager Doug Armstrong how he feels about no-movement clauses.
Not that you could buy him out anyway because in years 7 and 8 he gets a NMC. Even without the NMC, he has $2M signing bonuses in years 7 and 8, which along with his salary mean the total remuneration is higher than his AAV.
As Paul Bissonnette often says, that’s getting bent over, no spit, no lube with a sand-paper finish.
Jacob Trouba
Other than Lee’s, Trouba’s is the most team friendly. By the 4th-season his bonuses are fully paid out.
Trouba has a NMC clause until year 6 and 7 of the deal, when it becomes a modified no trade clause (M-NTC). For the remaining two years of the deal, 20% of his salary still must be paid out.
A buy-out in 2024 for example, would still see the Rangers pay $4M for 2 seasons (and then $2M for another 2 seasons after that). Plus, with a M-NTC, they can’t just unload him to anyone.
Team friendly for sure, but there are friendlier deals.
Matt Duchene
Nashville will think twice about buying out Duchene, thanks three signing bonus payments in the final three years of his deal.
He gets $2 million signing bonuses each year, and while over those three seasons his salary decreases, the presence of the signing bonuses limits the effectiveness of a buy-out should his production falter.
Nashville could just bite the bullet and buy him out, but they’d be stuck with a huge dead money cap hit. Trading him isn’t any easier thanks to a M-NTC and his high total salary.
Anders Lee
Meanwhile, the only signing bonus Anders Lee is getting in this deal he has already received.
The concern with Lee is that as he ages, his style of play will be hard to maintain. Lee does a lot of his damage as a goal scorer by parking himself in front of the net, absorbing cross-check after cross-check waiting for an opportunity to tip a puck.
Having said that, before getting injured this past season, we saw that he worked on his skating and he was one of (if not the best) the Islanders’ best players.
But Lamoriello has ensured that the last two years of his contract are also the cheapest. Years 6 and 7 pay $5.87 million and $4.5 million respectively. Now sure, year 5 sees $8.95 million paid, which, if he were to regress could be problematic.
However, when compared to three contracts above, purely based on contract, you’d take the one Lamoriello handed out to Lee any day of the week, particularly if you suddenly wanted to be rid of it.
A buy-out in 2024 for Lee would see cap htis of $2.87M, $4.22M, $1.72M and $1.72M. But there are no clauses restricting movement. He could be traded, he could be sent to the AHL.
While some fans grumbled at the size of Lee’s contract when it was signed, the fact is it was the market rate for a player of his talent. Two off-seasons later it is still the biggest on the team (though Mat Barzal’s AAV now ties it), and thanks to the pandemic, likely will remain the biggest for some time.
In the future, the Islanders can also hit the eject button if needed. Let’s hope it never comes to that with our chunky boi Lee, but ultimately we’re fans of the team, not individuals and sometimes, as much as you may like a player, you hope to see them move on for the sake of future team prosperity.
How about internally?
The deals Lamoriello has handed out have differed greatly from the three huge contracts he inherited. Johnny Boychuk***, Andrew Ladd and Nick Leddy take up collectively 21% of the Islanders cap space. Only Nick Leddy is still playing.
Let’s take a quick look at their contracts, and compare them to that of Anders Lee.
(A moment on Garth Snow here before we move on. Garth signed some great contracts, Scott Mayfield and Adam Pelech, for example. But he signed some shockers too. Garth was Garth. Hit on some, missed on some. Lou usually hits).
Nick Leddy
Leddy’s contract actually has no signing bonuses nor clauses restricting movement or trades. It is pure salary.
It is pretty buy-out able. In the 2021 offseason, you could think about buying Leddy out - his cap hit would be $833K but next season would be $2.3M. You could probably handle that if you were the Islanders.
If they’d bought him out last season it would have been even better cap wise: $1.25M, $750K, $2.25M and $2.25M.
In an off-season where some tough decisions may be required, Leddy’s contract is actually a great buy-out option. But then again, Leddy, while certainly not getting Norris votes, is a typically dependable player and was this season’s regular season assist leader.
Johnny Boychuk
***Since I initially wrote this article, Johnny Boychuk announced he would be medically retiring. The points below are no longer valid, but I’ve left them to illustrate how his contract structure limited the options available to the Islanders.
The final two years of Boychuk’s contract see him earn a $2.75 million signing bonus, limiting the salary relief of a buy-out to $833K over the first two years of what would be a four year buy-out.
His actual salary remaining is $5.25 million. $1.25M this year in salary. Next season it is $2.75M as a signing bonus and then another $1.25M in salary.
A trade, particularly given how tight most of the league is to the salary cap, is near impossible because of his $6M AAV.
(I do wonder though whether he is traded this off-season. After his signing bonus is paid, he’ll only be owed $1.25M in salary, but can provide $6M in genuine long-term injured reserve (LTIR) relief. His contract is by far the cheapest in terms of LTIR and I can see a scenario where he is traded to Tampa).
Andrew Ladd
Ladd’s contract is mostly signing bonuses, and while they have decreased in value over the length of his contract, they’re still there until the end and deliver minimal salary cap relief for three seasons.
Burying him in the AHL actually delivers better savings.
Even with two seasons left on his deal, a buy-out would only save $667K over the first two years of a four year buyout.
Like Johnny Boychuk***, the prospect of trading Andrew Ladd’s $5.5M AAV contract with three years remaining is remote (although Lou still tried with the Wild and Zach Parise).
And unlike Boychuk, Lou Lamoriello announced in the off-season that Ladd is healthy. His cap hit remains, there is no LTIR relief, no team would trade for him and he likely won’t play in the NHL again. It is an Adam Pelech or Anthony Beauvillier sized contract.
Lou’s other contracts
It would be remiss to skip over some other UFA contracts Lou handed out while with the Islanders. These actually differ somewhat from the model described above.
When he first took over, Lou signed Leo Komarov and Thomas Hickey while on the Island.
Interestingly, these two contracts actually see a slightly different bonus structure.
Komarov received a $1 million bonus in year 1 and year 3 (the past season).
Meanwhile, the one bonus Thomas Hickey received was $1.25 million in year 3.
Ironically, in the context of this article at least, it has limited the cap relief of a buy-out of either player.
Komarov is still a very valuable player to the Islanders, but in the flat cap COVID world, $3M is a lot, while Thomas Hickey seems to be well down the depth chart.
In spite of this I am inclined to give Lamoriello the benefit of the doubt.
When Komarov and Hickey were signed, Lou had inherited a team with a gloomy outlook.
John Tavares had left (and the team didn’t even manage to get a 1st round pick back for him), the team didn’t have many prospects in the pipeline and frankly, a lot of people thought the team would be terrible.
The team did have $23M in cap space though, and even Lou couldn’t have been prepared for a global pandemic.
Things changed rapidly but there was no way to know that when he signed them.
Conclusion
Look around the NHL. It is easy to sign players to big contracts - it is not so easy to sign to them to big contracts on team friendly terms. Lou is one of a handful of General Managers who can.
As fans we never want to see a player underperform, but the fact is that some will.
Lou has walked a fine line between keeping good players around right now, while also keeping cap flexibility in a few year’s time.
The way he has structured the deals of the Islanders’ large unrestricted free agent contracts has ensured the team can stay competitive now, but won’t be beholden to a poor deal down the road.
It is yet another feather in Lou’s cap. The tremendous positive influence he has had on the Islanders in 3 seasons is immense and the team is lucky to have him.