Why the New Jersey Devils Were Prevented From Signing Ilya Kovalchuk

Jabber HeadSenior Analyst IJuly 22, 2010

By now (if you wanted to or not) you have heard about Kovalchuk signing his insanely long 17-year, $102 million contract, which was denied today by the NHL deputy commissioner Bill Daly:
“The contract has been rejected by the League as a circumvention of the Collective Bargaining Agreement. Under the CBA, the contract rejection triggers a number of possible next steps that may be elected by any or each of the NHLPA, the Player and/or the Club.

"In the interim, the player is not entitled to play under the contract, nor is he entitled to any of the rights and benefits that are provided for thereunder. The League will have no further comment on this matter pending further developments.”
More information can be found in the CBA, section 26.3 titled “Circumventions.”
Basically the league is saying that because NHL contracts are averaged out (ex. a 25 million contract/five years = $5 million a season) that a contract of $102 million over 17 years breaks down to less cap hit each year then a contract of a $102 million over 10 years, giving (in this case) the Devils more spending money each year.

While it is in the Devils' power to give out 17-year contracts, the problem is that Kovalchuk is 27, meaning (27+17) Kovalchuk would be 44 when his contract expires and the likely hood that he can continue to play at that age is very slim.
Now the Devils will probably have front loaded the contract (meaning the next X amount of years they pay Y amount more then in the last few years) but the cap hit there still become reasonably less in a long term deal.
For example: $102 million over 17 years.
If you average that contract out, you would pay him $6 million a year over the course of the 17 years.
You could front-load that contract, for example, to pay him $8.5 million a season for the next 10 seasons (until he is 37) and have paid him $85 million and then lower that for the last seven years. Even though he would probably retire with some money left on the table (at that point it wouldn’t really matter), it’s all about the cap hit.
There are a few different ways they could spread this out (depending on cap space) such as $10 mil the first two seasons then drop to $8.5 or another number, but it gives flexibility to the team, I just used one number as an example.
Example two: $102 million over 10 years.
If you average that contract out, you would have to pay $10.2 million a year over the course of 10 years.
You have to pay more each season ($10.2 million) with practically no flexibility (there is a cap on how much 1 player can make each year).
You don’t get the same flexibility as example one, which is why people view example one* as a loophole in the CBA.
The league felt the Devils exploited this loophole and thus rejected the contract.
But has Kovalchuk and his camp done something that other players in the league haven’t?
Two notables...

WestCoastExpress is a Jabberhead and an SJ contributing author. Read more of WestCoastExpress at Hockey Jabber Blog .
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