When a National Hockey League (NHL) player signs a contract with a team, it is often a long-term commitment. However, there may come a time when a team wants to terminate that contract early. This can be done through a process called a buyout.
So, how does an NHL contract buyout work? Let`s break it down.
First, it`s important to understand that the NHL has rules in place regarding buyouts. According to the current collective bargaining agreement (CBA), teams are allowed to buyout up to two contracts following each season. The window for buyouts typically opens in June and lasts for a limited time.
When a team decides to buy out a player`s contract, they must first notify the NHL and the NHL Players` Association (NHLPA) of their intention to do so. The team will then be required to pay a portion of the player`s remaining salary and bonuses over a length of time, depending on the player`s age when the buyout occurs.
The amount of money that the team owes the player is a percentage of their remaining contract value. For players under the age of 26, the team must pay one-third of the remaining value over double the remaining length of the contract. For players 26 and older, the team must pay two-thirds of the remaining value over double the remaining length of the contract.
For example, let`s say a player has three years remaining on their contract with a total value of $18 million. If the player is under the age of 26, the team would be required to pay $6 million over the next six years ($1 million per year) as part of the buyout. If the player is 26 or older, the team would be required to pay $12 million over the next six years ($2 million per year).
It`s important to note that the salary cap hit for a buyout is not the same as the actual payment owed to the player. The cap hit is calculated differently and spread out over a number of years depending on the player`s age when the buyout occurs.
For players under the age of 26, the cap hit is the remaining contract value divided by the number of years left on the contract, multiplied by two. For players 26 and older, the cap hit is the remaining contract value divided by the number of years left on the contract, multiplied by four.
Using the same example as before, if the player is under the age of 26, the cap hit would be $3 million per year for the next six years. If the player is 26 or older, the cap hit would be $1.5 million per year for the next 12 years.
In summary, an NHL contract buyout allows a team to terminate a player`s contract early by paying a portion of their remaining salary and bonuses. The amount owed is based on a percentage of the remaining contract value and is spread out over a length of time depending on the player`s age when the buyout occurs. The salary cap hit is calculated differently and spread out over a number of years as well. By understanding the rules and guidelines, NHL teams can use buyouts as a tool to help manage their salary cap and roster.
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