Friday, March 07, 2008

Waivers v. Buy-Outs (with a small update)

I thought I was watching NHL Classics last night, a repeat from last January when the Leafs beat the Bruins 10-4. (As an aside, I actually managed to see that that game via sopcast whilst eating paranthas and drinking chai at a very early breakfast in Hyderabad, India. It's a very odd feeling when an NHL game finishes at 9 AM.)

Here's a bit of a quirky factoid: the same day that the Leafs pasted the Bruins 10-4, the Canadian Juniors beat the US in the semis when Carey Price stopped Peter Mueller in the shoot-out.

Fast forward 14 months and on the night that the Leafs paste the Bruins for a second time, Price bests Mueller again in their first match-up since that World Junior shoot-out game.

Buyouts? Really?!?

I'm not sure why there's been so much talk about the Leafs buying out various players. Wharnsby was guilty of this in yesterday's Globe, it's a talking point in Cox's most recent mailbag and it was a featured element of Steve's (otherwise great) blog entry on how he'd re-build the Leafs.

Buy-outs have become bit of a zombie issue to me - no matter how many times you think you've killed them, they just keep coming back.

So long as there's such a thing as the waiver wire, there's no reason to buy-out anyone on this team - with the exception of players with a NMC.

Full stop.

There's no reason for the Leafs to take any type of long-term cap hit to dispose of Blake, Bell, Raycroft, Kubina (take your pick of 90% of the roster) when those players can be placed on waivers (obviously, a trade would be the preferred method but if a guy won't waive his NTC, the waiver wire it is.)

Here's how the waiver wire works:

If another club claims a player off the waiver wire, that team takes on 100% of the salary and 100% of the cap hit. The Leafs are free and clear of the player, the salary and the cap implications.

If the player goes unclaimed, the Leafs then have two options:

1. Pay the player their salary to play in the AHL (or ECHL if it's Raycroft).

Under this option, the Leafs do have to pay their salary, but if the player is playing in the minors, the team takes zero cap hit (zip; nada; zilch). MLSE has deep deep pockets so I don't think this will be too much of a problem.

2. The Leafs can also recall an unclaimed waived player with the rather large caveat that the player has to clear waivers a second time (re-entry waivers). Under this option, if the player is claimed on re-entry by another team, the Leafs are on the hook for 50% of their salary (and 50% of the cap hit) for the duration of that player's contract. This is what Pittsburgh did with Recchi (now with Atlanta) and Chicago did with Samsonov (now with Carolina).

So waivers or buy-outs?

Let's take Raycroft as an example.

If the Leafs buy-out his contract, under the CBA the Leafs must pay Rayzor 2/3rds of his remaining contract, paid out over twice the remaining length of the deal.

Raycroft, with one year remaining on a $2 million contract (nice work JFJ!), would be paid $2MM x.66 /2 or $660,000 for two years with the Leafs carrying that $660K cap hit for two seasons as well.

Factor in a replacement back-up goaltenders salary - say Pogge at $638 - and the Leafs are stuck with a cap hit of $1.3M for back-up goaltending.

The buy-out creates $700K in cap space.

If they waive Raycroft, the Leafs pay $638K for back-up goaltending and take a cap hit of $638K for back-up goaltending.

The waiver wire creates $1.36 million in cap space.

Seems like a no-brainer to me.


As I was on my way to a lunch meeting it struck me that buy-outs vs. waivers might just be the key to understanding this franchise.

Consider: a buy-out hinders the Leafs by saddling the team with a multi-year cap hit, but it ultimately saves MLSE money and funnels more dollars towards their bottom line.

A waived player makes things better for the Leafs but costs MLSE a lot more dough.

Based on that very basic and rather simplistic viewpoint, I'll go out on a limb here and suggest that if this club waives players, MLSE may not be the greedy, bottom-line first franchise as so many detractors claim.

Conversely, if they pursue buy-outs instead of waivers, it certainly suggests that the bottom line comes before doing whatever it takes to help the Leafs win.


  1. Anonymous12:25 pm

    Nice article, Mike. It makes so much sense the Leafs definitely won't follow your advice. It would fly in the face of tradition at the ACC.

    This lucid examination and explanation by Mike is why I'm spearheading the Bitter Leaf Fan for GM campaign. Everyone who believes Mike should be the next GM of the Leafs, please sign below. When we've accumulated enough signatures, I'll submit it to Peddie and Kirke. They'll look at it, laugh, and then hire whomever is willing to pucker up and kiss their collective asses, unfortunately. I know the proposal is doomed from the start, but if there's a chance for free tickets...

  2. Anonymous12:44 pm

    I'll sign the petition! Where do we submit resumes for other front office positions in your regime?

    Buy-outs have to be an absolute last ditch effort on the part of the team. Burying a player in the minors might cause some bad blood for potential UFAs but more than likely that will be set off by the scent of money.

    The one thing that the buy-out advocates don't mention is that while the cap could continue to go up by leaps it might increase minimally or even go down. In any case, that money will handicap the team just as the point when in theory it will be good again. In the latter two scenarios it will do a tonne of harm.

  3. As PPP mentions, the one tricky part here is the perception this creates around the league. If I'm a UFA looking at an offer from Toronto, I'll be hesitant to sign if I think that a bad stretch of play will have me buried in the minors as an accounting trick.

    That applies to guys like Kubina or Blake -- guys who can still play at an NHL level but who don't fit into the team's cap structure. Yes, they've underperformed their contracts, but they're still clearcut NHLers.

    A guy like Raycroft who may not be able to find work in the NHL these days could be a different story.

  4. Paul - extremely kind of you to start a petition, but I'm the last guy that should be thought of as GM material. I can't even win the title in my hockey pool.

    PPP and DGB - Thanks for your comments, but I think the whole waiver thing affecting future UFAs is overblown. New Jersey and Philly have both waived their fare share of NHLers without it coming back to bite them. And if the players in question are clear cut NHLers some team will most certainly snap them up and they won't be the Leafs' problem anymore.

  5. Super interesting. I have to agree though that it sends a bad message around the UFA's of the league. It's hard enough getting quality guys to the Leafs because it's Canada, or the media pressure, etc. We don't need more guys thumbing their noses at us of the like they get in Edmonton.

  6. Anonymous11:27 am

    Mike, you can hire Hebsie and I to be your special assistants. We've both won the pool and can provide you with the managerial expertise you claim you're lacking.