The hidden financial benefits of the Kasperi Kapanen trade for the Pittsburgh Penguins

To be clear, the Pittsburgh Penguins acquired Kasperi Kapanen for several valid reasons.

They wanted to get younger. Kapanen, though it seems like he’s been around forever, just turned 24. He was younger than every forward who played for the Pens in 2019-20 (being just a couple months younger than Jared McCann). Kapanen is now the second youngest player on the Pens’ projected NHL roster, behind John Marino.

The Pens wanted to get fresh legs and get faster. Kapanen accomplishes those items as well with his skating ability.

Younger, faster, check and check. That’s the primary reasons to get Kapanen.

As it turns out, the financial side of this deal benefits the Pens too. Kapanen’s contract, per CapFriendly, has been heavily bonus-laden. 2020-21 bonuses have already been paid, so Toronto paid the $1,000,000 below. The yellow highlighted amounts are the only ones that Pittsburgh will pay to Kapanen over the next two seasons.

Breaking this down, that means Pittsburgh will have a real expense of $4.2 million dollars total in the next two seasons. But Kapanen will carry a $3.2 million cap hit in each season, being as cap hits are the average of the contract.

Kapanen’s contract is unique compared to many across the league, because Toronto went ahead and paid him a massive $3.7 million dollars as a bonus last season. Structuring the contract to get so much money up front shifts the dynamic of the rest of Kapanen’s contract.

Signing bonuses are becoming a way for big market teams to leverage their advantages in a salary cap world. There’s not many ways they are able to do that compared to the old system, but this is one key way. Toronto’s $77 million contract for John Tavares, for instance, includes almost $71 million in signing bonuses payable once a year in big lump sums and was front-loaded to include paying him almost $44 million in the first three years of the contract.

That’s good for the player to get the money up front, but it’s also beneficial for the team, if they can afford it, to stand out and make a good offer. And paying up front opens up more possibilities for financial purposes down the line. Several times in NHL history we have seen high-priced cap hits (with very little actual salary) get traded to small market teams when the player is too old or injured to continue playing. Think Marian Hossa finishing his days in Arizona, or Ryan Callahan currently on the Ottawa Senators’ books for a a $5.8 million cap hit in 2019-20 with only a $4.7 million salary (that insurance is mostly paying, but that’s a different topic).

In addition to Tavares and Kapanen’s contracts being setup like this, the Leafs made similar moves in theory with recent contracts by front-loading money for Auston Matthews, Mitch Marner, William Nylander, Andreas Johnsson, Alex Kerfoot, Frederik Andersen and Jake Muzzin. This is an extreme example, but the absolute behemoth big market teams (New York, Toronto, Montreal) can afford to play by a different set of rules than 90% of the league.

Due to the big bonuses for players like Tavares, Matthews, Nylander and Marner, CapFriendly estimated that Toronto’s actual salary expense this season was over $111 million. The upper limit of salary cap itself was just $81.5 million. Toronto blew past that but still stayed under the cap by having long-term contracts that decrease in money.

What the big market clubs then do, over time, is move these contracts to smaller teams if/when there’s an injury or ineffectiveness, and then have more space to spend. In theory, by Toronto spending way more now, in 4-5 years they should be spending less once the front-loaded contracts wear off. In execution, the team will almost certainly trade one, of not two or three of those players and then look to reload. (After all, there are already rumors and whispers that Nylander could/should get traded, and he’s only completed one year of his six year contract).

This type of strategy is exactly what Tampa recently did with Callahan, or the Leafs did to clear Patrick Marleau and his $6.5 million salary by sending it to Carolina. It’s the salary cap world’s way to churn big contracts (but smaller actual salary expenses) to smaller teams, which only opens space for the large markets to continue to send big bucks.

Big salary bonuses have been a bridge the Pens haven’t really crossed in recent contracts. Jake Guentzel, Patric Hornqvist and Marcus Pettersson — the largest total dollar signings the team has made — have all been straight salary, no bonus at all and little to no extra cash up front. Free agent signing Brandon Tanev did get his contract structured to pay a $1.0 million bonus each season. Pittsburgh has been a team willing to spend to the cap limit, and the contracts signed many years ago by Sidney Crosby and Evgeni Malkin did include heavy bonus amounts, but the Pens operate in a different realm from a team like Toronto that can financially afford to front-load every multi-year contract extension.

There are reports in the covid uncertain future that Pittsburgh will want to trim payroll. But they still want to compete for Stanley Cups in the salad years of Sidney Crosby and Evgeni Malkin as well. Picking up a player like Kapanen — a former 20 goal scorer who is still the youngest forward on the team with a discounted salary — is a well-rounded way to compete with a nod to some fiscal savings.

Player value and the total breadth of an asset extends just beyond goal and assist total, understanding how a player like Kapanen with three more seasons of team control and on a friendly remainder of this contract helps paint a full picture of why the Pens felt he fits so well.

There’s another aspect of this trade too, with David Warsofsky’s inclusion in the deal. It’s easy to overlook, Warsofsky hasn’t played in the NHL since 2017-18, but is one of the better AHL players around. He’s also a handsomely paid player on a two-way contract that has a $400,000 down-side guarantee for next season. Swapping Warsofsky for Jesper Lindgren (AHL base salary: $70,000) also saves the organization a small chunk of change, with Lindgren scheduled to play in Sweden on loan next season as well. Warsofsky’s inclusion in this trade wasn’t a major part and didn’t effect much, but still shows an organization in Pittsburgh doing a little financial belt tightening.

In essence, this is a trade with positive financial repercussions for the Pens. They have to pay out of pocket an average of $2.1 million for the next two years, Pittsburgh gets the benefit of Toronto pre-paying an average of $1.1 million of Kapanen’s cap hit due to his earlier bonuses.

It’s also a positive for Toronto because while they paid the actual money, they don’t pay any penalty on the salary cap, unlike the last major PIT/TOR trade that saw the Leafs retain 15% of Phil Kessel’s contract. Toronto also got a handsome trade price for Kapanen, a decent player that they made an even more attractive asset be partially pre-paying some of his salary. If it wasn’t Pittsburgh this week agreeing to give up a first round pick and a prospect, it could have easily been a team like New Jersey or Carolina doing so before the October draft.

This isn’t the same at all as selling Alexei Kovalev or Jaromir Jagr to big market teams for $5,000,000 a piece and basically nothing else, but the Pens were pretty crafty in the Kapanen deal to accomplish their goals (get younger, faster, better in 2020-21) and also make a friendly deal on the financial side of the ledger. More than ever in these uncertain times, that’s a wise way to operate.

There’s no doubt that the Pens wanted Kapanen for who he is as a player and that they think he can add to their top six forwards, but in this day and age it would be foolish to not accomplish that goal while also making sure it’s financially savvy. The most recent Pens/Leafs trade certainly checks that box for Pittsburgh and demonstrates that how through large signing bonuses early in contracts, big market teams can essentially pay their way around the upper limit of the cap.