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Risks and Rewards of the Restricted Free Agent Offer Sheet

Voynov_hawksIn the NHL, there are two types of free agents.

Those who are gonna get paid and those who are GONNA GET PAID (I’m looking at you, Bryan Bickell!).

I kid, I kid… although the 2013 NHL lockout is going to look even more ridiculous this offseason once the next round of bloated contracts are signed (I’m, sadly, looking at you, Mark Streit).

The two types of free agents are restricted and unrestricted free agents. The distinction between the two is based on the number of professional (NHL) games played and the amount of professional experience (number of years in the NHL) since signing an entry level contract.

The only important distinction that matters to hockey fans is that signing a restricted player comes with additional risks.

Teams with restricted free agents have “Right of First Refusal.” In layman’s speak, the club with the rights to a restricted free agent has the right to match any offer signed by the player and accept it as their own. If they do not match within seven days, the offer sheet is considered approved and draft pick compensation is awarded to the original club.

Compensation, per Article 10 of the new collective bargaining agreement, works as follows:

Offer Sheet                                           Compensation

$1,110,249 or below                            None

Over $1,110,249 to $1,682,194         Third round pick

Over $1,682,194 to $3,364,391        Second round pick

Over $3,364,391 to $5,046,585       First and third round picks

Over $5,046,585 to $6,728,781       First, second, and third round picks

Over $6,728,781 to $8,410,976       Two first round picks, one second and one third round pick

Over $8,410,976                                 First born children or four first round draft picks

So, clearly, there are risks.

No organization can sign players to more than one offer sheet at a time. In today’s NHL, if a team is looking to go this route to improve their team, it more or less prevents them from doing anything else. That’s seven days of missed negotiations with other players available as free agents or trade acquisitions. Signing an offer sheet on July 5 is essentially management suicide.

There is a risk that the players eventually selected with the compensation draft picks could be worth more in the long-term than the player signed. This risk is mitigated if the contract signed comes at a lower salary; a second round draft pick alone may ultimately not be as valuable as the free agentbsigned, but four first round draft picks is rarely justifiable.

There is a risk that signing a player to an offer sheet is putting a target on one’s back for future retribution, though this is difficult to measure beyond speculation. Nashville Predators general manager Dave Poile may not appreciate the offer sheet signed by defenseman Shea Weber last offseason, but there has been no public animosity between he and Philadelphia Flyers general manager Paul Holmgren.

There was that time that Edmonton Oilers general manager Kevin Lowe and Anaheim Ducks general manager Brian Burke almost got into a barn fight over an offer sheet, but this type of overreaction is rare.

With all the risks associated and the likelihood that most teams will match any offer out of spite (regardless of financial viability), why even bother with restricted free agents?

It all depends on the reward.

The following is a sampling of available restricted free agent defensemen available on July 5:

  • Chicago Blackhawks: Nick Leddy
  • Los Angeles Kings: Keaton Ellerby, Alec Martinez, Jake Muzzin, Slava Voynov
  • New York Islanders: Travis Hamonic
  • New York Rangers: Ryan McDonagh and Michael Sauer
  • Phoenix Coyotes: David Rundblad and Michael Stone
  • St. Louis Blues: Alex Piatrangelo and Kevin Shattenkirk
  • Toronto Maple Leafs: Cody Franson and Carl Gunnarsson
  • Winnipeg Jets: Zach Bogosian

Many Flyers fans are fixated on the offseason plans for the St. Louis Blues, who are one of the lowest spending organizations in the NHL. The “thought process” is that if an offer sheet is extended to one of their top young defensemen, they may not be willing to match an offer sheet for financial reasons.

If Nashville can match the 14-year, $110 million contract for Shea Weber, though, St. Louis can (and will) match any offer to Piatrangelo or Shattenkirk.

This isn’t rocket science. They are a team with ample salary cap space that can absorb whatever contract is signed by their players.

A team like the Los Angeles Kings, on the other hand, has only $11.8 million to fit 9 players on their 2013-14 roster. If they go into July 5 without shoring up their restricted free agents, they will be at risk of being unable to match any competitive offer sheet for their players.

An example of well-planned offer sheet manipulations (or “NHL Management Best Practices,” if you will) is the San Jose Sharks’ feeding on the Chicago Blackhawks in 2010. The Sharks signed defenseman Nicklas Hjalmarsson to an offer sheet that the cap-crunched ‘Hawks felt forced to match. The Blackhawks then did not have enough space to re-sign Stanley Cup-winning goaltender Antti Niemi, who signed with (who else?) the San Jose Sharks.

Signing restricted free agents comes with ample risk, but the reduced salary cap has produced a situation ripe for exploitation.

Say what you will about the Flyers’ management practices, but the organization’s practice of signing players well in advance of free agency reduces the risk of offer sheet signings. This is especially important when you consider how close to the salary cap the team is year after year.

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Profile photo of Josh Janet Posted by on Jun 16 2013. Filed under BREAKING NEWS, Flyers, News, NHL. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

1 Comment for “Risks and Rewards of the Restricted Free Agent Offer Sheet”

  1. Nice article Josh. I think that the Hawks are very happy with Crawford instead of Niemi. He did almost cost them the finals when he tried to match softies with Leighton.

    Some nice players on that list. Voynov would look awful nice in orange and black.

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