Whoever takes over as the Penguins' new general manager has a tough job on his or her hands when it comes to the Penguins' salary cap situation.
The Penguins currently have seven forwards, seven defensemen and one goaltender who are NHL-caliber and under contract for next season with just over $20 million in projected cap space. Whether the Penguins' No. 1 goaltender is Tristan Jarry or someone else, a good chunk of that space will have to go toward the Penguins' answer in goal. Decisions also have to be made on other unrestricted free agents including Jason Zucker and Brian Dumoulin, and restricted free agents like Ryan Poehling, Drew O'Connor and Alex Nylander.
It would help if the Penguins could free up some cap space, and one avenue to do that is a buyout.
The NHL's first buyout period of the offseason opens on June 15 or 48 hours after the Stanley Cup is awarded -- whichever is later -- and runs until June 30.
The Penguins have used a buyout just three times in their history, first buying out Sebastien Caron and Shane Endicott in 2006, then buying out the remainder of Jack Johnson's contract in 2020. The Penguins will be paying that Johnson buyout off through 2026. That buyout cost them $1,916,667 this season, and drops to $916,667 for the final three years.
How are those buyout penalties calculated?
If a player is older than 26, the team is still responsible for two-thirds of the remaining salary. If a player is younger than 26, the team is only responsible for one-third. Full signing bonuses are still paid out in any case. The amount of time a team has to pay out the remaining salary is equal to double the amount of time remaining on the contract at the time of the buyout.
The actual cap hit of the penalty is calculated the following way, per CapFriendly:
1. Multiply the remaining base salary by the buyout amount (as determined by age) to obtain the total buyout cost
2. Spread the total buyout cost evenly over twice the remaining contract years
3. Determine the savings by subtracting the annual buyout cost from Step 2 by the player's base salary
4. Determine the remaining cap hit by subtracting the savings from Step 3 by the player's average annual base salary.
That means that a good buyout candidate would ideally have few years left on his contract, and not have a contract structure that is backloaded in salary or paid out in signing bonuses, since a buyout is calculated with salary remaining on the contract, and signing bonuses are paid out in full.
Let's take a look at some popular suggestions for buyout candidates and whether they actually make any sense for a buyout based on their contract.
JEFF CARTER
I'm this close to getting "Jeff Carter's cap hit cannot be reduced via a buyout" across my forehead, as often as it's suggested by fans.
One caveat to all the buyout math points made above: They don't apply to players on 35+ contracts. Players on 35+ contracts cannot have their cap hits removed or reduced by contract termination, buyouts, early retirement or re-assignments to the minors. And since Carter has a no-movement clause, the latter isn't possible without his consent regardless.
What is a 35+ contract? It's a multi-year contract signed by a player after the age of 35 that is either frontloaded in salary structure or has signing bonuses beyond the first year. It's not an automatic for any player who signs a deal after the age of 35. Ron Hextall frontloaded Carter's contract ever so slightly, which was likely done in order to give him that protection that comes with being on a 35+ contract.
That doesn't mean that Carter can't be bought out. His no-movement clause doesn't protect against buyouts either. The 35+ designation just means that there would be zero cap benefit at all. Carter's $3.125 million cap hit counts in full next season whether he's bought out or not.
That's not happening. Even if Carter wasn't going to be in the lineup, a GM isn't going to take on $3.125 million in dead cap just to make him go away.
JAN RUTTA
Hextall's first big free agency signing of 2022 is a luxury that the cash-strapped Penguins can't really afford. Rutta is a third-pairing defensemen with two years left on his contract that carries a $2.75 million cap hit. His role isn't one that someone like Mark Friedman or Chad Ruhwedel can't fill almost just as well for close to $2 million cheaper.
Does that mean a buyout is the best route? Not really.
Rutta's buyout penalties would last for four seasons since his contract has two years remaining. He has no signing bonuses and his contract was slightly frontloaded in structure. The dead cap from a buyout would be as follows, using CapFriendly's calculator:
2023-24: $1,083,333
2024-25: $1,083,333
2025-26: $833,333
2026-27: $833,333
That means that the Penguins would get $1,666,667 in savings for each of the next two years, followed by a $833,333 penalty in the two years after Rutta's contract would have expired. Worth it? Not really. At that rate, they'd be better off trying to trade him with 50% retained if they were that desperate to move on from him.
JEFF PETRY
Petry is the Penguins' highest-paid defenseman at $6.25 million, a contract that has two years remaining. He's overpaid. And if the Penguins did want to move on from Petry at some point, his 15-team no-trade list could make that difficult.
Are the buyout implications worth it? One factor is that Petry has signing bonuses in each of the next two years -- $3 million next season and $2 million in the season after that -- which get paid out regardless. His contract is also slightly frontloaded. Here's how the dead cap would work:
2023-24: $3,000,000
2024-25: $4,500,000
2025-26: $1,250,000
2026-27: $1,250,000
That would save the Penguins $3.25 million next season and $1.75 million in what would have been the last year of Petry's contract? Worth it? No. Again, Petry's a little overpaid, but you're likely not replacing him on the open market for $3.25 million.
MIKAEL GRANLUND
Hextall managing to free up $5.5 million in cap space going into the trade deadline and using that to acquire Granlund, who has a cap hit of $5 million, is one of the more puzzling moves of Hextall's tenure, and that's saying something.
Granlund's role in Pittsburgh was a bit different from the top-six role he had in Nashville, having more defensive and penalty-killing responsibilities. He did fare well in those areas too, as the on-ice metrics show. But that doesn't make a player worth $5 million per year. His scoring totally fell off. After scoring nine goals and 27 assists in 58 games with Nashville, Granlund only scored one goal and four assists in 21 games with Pittsburgh since the trade.
Granlund has two years left on his contract. He has no signing bonuses, and his contract is just slightly backloaded. Here's how the dead cap would work out:
2023-24: $833,333
2024-25: $1,833,333
2025-26: $1,833,333
2026-27: $1,833,333
That's a whopping $4,166,667 in savings for next year and $3,166,667 in savings for the following year. The Penguins could replace Granlund's contributions for cheaper than that, and have space leftover. And the penalty for doing so would just be $1,833,333 for two additional years when the salary cap is likely to go up and the Penguins' window to win could very well be slammed shut by then anyway? That's incredibly reasonable.
This is the one buyout candidate that could make real sense for the Penguins. The savings in the immediate future would be significant, and the additional penalties it would bring are pretty minor.
