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The Math of buying out Ryan Callahan now versus next summer

Exploring the math on two potential buy out scenarios.

NHL: Stanley Cup Playoffs-Washington Capitals at Tampa Bay Lightning Kim Klement-USA TODAY Sports

Buying out the contract of Ryan Callahan has been a popular suggestion for fans on social media for some time now. There’s no question that his current role and production does not match the $5.8 million salary cap hit he has for the Tampa Bay Lightning. His contract has two years remaining and buying him out has to be at least considered by the front office as a potential road for getting out of the contract. The consideration is whether to do it now or next summer.

The third option is to trade him now that his No Trade Clause has changed to a Modified No Trade Clause (starting July 1st) and possibly retain salary. The details of his Modified No Trade Clause are unknown so we don’t know if it’s a very small number of teams he can be traded to (like 5 teams) or a larger field that’s available (10-15 teams). His shoulder surgery also complicates the issue, especially in the case of a trade.

But let’s go back to the first option; the buy out. A buy out allows a team to get out of their commitment to a player and pay them less than they are owed over the remainder of the contract. The team also gains salary cap relief, but the salary cap hit is stretched out over twice the amount of time remaining on the contract. So while the team gains some relief in the short term, the team adds a salary cap hit to future years after the player’s contract would have ended.

It’s worthwhile here to examine the math of buying out Ryan Callahan now versus next summer. It will allow us to see where the benefits and costs lie in taking either option. All salary cap information comes from the great folks at CapFriendly.com. I encourage you to go poke around on their web site as they have a ton of useful information, tools, and fun toys like the Armchair GM.

Buying Out Callahan Now

If the team buys out Callahan now, here’s how the break out goes by season.

  • 2018-19 - $3,133,133 cap savings. $2,666,667 cap hit.
  • 2019-20 - $3,133,133 cap savings. $2,666,667 cap hit.
  • 2020-21 - $1,566,667 cap hit.
  • 2021-22 - $1,566,667 cap hit.

The Lightning would enjoy just over $2.5 million in cap savings over the next two seasons to use on other players. His spot on the roster would theoretically be taken by a player making $1 million or less, so it provides the team with $1.5 million in extra cap space. This is due to the fact that during the first four years of his contract, Callahan was paid an actual salary of more than his cap hit. Because the Lightning got a “savings” against the cap in the early years of the contract, the impact of buying him out is lessened. If the contract had been reversed with the early years being less than the salary cap, a buyout would be more beneficial now.

As of now, the cap hits would be stretched out over four seasons and would cost the Lightning $1.5 million in salary cap space in 2020-21 and 2021-22. So the $1.5 million in cap space they gained for the first two years would be more or less paid back with cap hits in the last two seasons of the buy out.

Buying Out Callahan next summer

Now the break down for buying out Callahan next summer, when the cap savings might be more needed for new contracts for Nikita Kucherov and Brayden Point.

  • 2019-20 - $3,133,33 cap savings. $2,666,667 cap hit.
  • 2020-21 - $1,566,667 cap hit.

Once again, the Lightning would gain about $1.5 million in salary cap space for 2019-20, but then would have to pay that back in 2020-21. Again, that’s assuming that his roster spot is taken up by a player making $1 million or less, such as a prospect on an entry level contract. Waiting until there is only one year left on his contract means that he’s on the salary cap for only three more years (including 2018-19) instead of four more years.

The Differences

When we compare the breakdowns for both options of buying out Ryan Callahan, there is no difference in 2019-20 and 2020-21. The differences are from 2018-19 and 2021-22. The Lightning can save a little bit of space now, but that means paying back most of the salary cap savings in 2021-22.

As I’ve gone through the projected roster for the 2018-19 season and what I think the restricted free agents will be signed for, as long as the salary cap goes up to $80 million, with the current estimates being $78-$82 million, then the team should be fine without making any other moves. I still ave it in the back of my mind that Steve Yzerman might consider trading J.T. Miller since signing him long term is unlikely to be a viable option after 2019-20 when you also have to factor in raises to Mikhail Sergachev and Andrei Vasilevskiy to go with Kucherov and Point’s raises.

To me, it makes a lot more sense to attempt to trade Callahan and retain some of the salary to save more space. The team can retain up to half of his salary cap hit which would mean a $2.9 million cap hit and a similar savings in 2019-20 without adding the extended cap hit of buying him out. It will be hard to trade him without giving up additional assets such as a prospect or draft picks to entice a team to take on some portion of Callahan’s contract. And maybe Yzerman finds a way to go the distance with Callahan still on the roster. We know he’s a Jedi and he’s made crazier things happen in his tenure with the Lightning.