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Personal finance


Got some interesting feedback from a couple sources regarding Kovalchuk’s 17 year deal, and its potential impacts on future CBA negotiations.

Source 1:

“These long-term deals are getting ridiculous. How many teams can compete? Kovalchuk only had two suitors due to the number of years he wanted. The league is going to look at both capping contract term and moving toward non-guaranteed contracts in the next CBA.  Contracts signed 1-2 hrs after FA are also going to be looked at and hopefully resolved. The gloves will be off on both sides, but this stuff needs to be done.”

Source 2:

“Kovalchuk may have unwittingly screwed the escrow issue for a lot of players. As more players make more salary than cap hit, payroll figures get inflated and the players end up paying a higher percentage of their salaries back into escrow. Kovalchuk’s salary will be 5.5m beyond his cap hit for five years of the contract, 4.5m and 2.5m above for another two years after that. He’s not the only player whose contract does this, but is the most high-profile given his standing and the absurd length of his deal. It’s going to be interesting to see how this affects negotiations as players will inevitably find themselves fighting opposing fronts — for contract freedoms such as term and front-loading, but against the escrow payments that result from those very freedoms. Advantage: league.”

The interesting part about the escrow concern is Kovalchuk’s salary doesn’t jump beyond his cap hit until the 2012-13 season — the same year it is anticipated a new CBA will be in effect (I believe the existing CBA has been or will be extended through the 2011-12 season). The contract was set up this way by design, and should be considered very telling as to what the focus of CBA negotiations will be from the NHLPA’s perspective.

Update: Some have been asking in the comments why Kovalchuk’s contract doesn’t violate either of the so-called “100%” and “50%” rules. The reason for this is after the jump.