This past week we finally received some good news when the Dallas Stars announced they had signed restricted free agent Nicklas Grossman to a two-year contract extension worth $3.25 million. Immediately two thoughts went through the heads of Stars fans: great deal for both the team and the player, and how they heck can they still afford to sign Matt Niskanen and James Neal.
Of course, it's James Neal everyone is worried about.
Around the same time, I received a couple of email inquiries, Twitter messages and even messages on Facebook about the situation and how it was tied into the impending sale of the team. I also received some inquiries from other teams' fans and some bloggers and reporters as well. It seemed to me that there is a lot of misinformation floating around right now, based on their questions, and there are certainly some myths that need to be addressed as we get ready for training camp to start next month.
So after the jump I tackle a few of the big myths hanging over the Dallas Stars, including the sale process and the actual financial situation the team is in. I must warn you, this could get lengthy.
Myth #1: The Dallas Stars are hard up against their internal salary cap, and might be over it.
Fact: The Stars are actually under their internal cap and still have room to operate.
This one came as a bit of a surprise to me but is one that seems to be the prevailing thought amongst fans and national journalists, which troubles me a bit. After the Stars signed Grossman I started seeing talk about whether other teams might now have the chance to swoop in and nab Neal, since there was just no way they could afford to match an offer (see #2). While I knew that the Stars were close to their internal payroll cap I was having trouble figuring out exactly where these theories were coming from. Then I saw the current cap hit number thrown out there and I realized where the myth was growing from.
It's important to remember that in the NHL there are two very important numbers when it comes to salary.
The "salary cap hit" figure is used by the NHL to determine where a team falls in regards to the salary cap. This figure is the average yearly salary over the length of a contract; so a $16 million contract over four seasons would have a yearly cap hit of $4 million. This is the number used to determine where a team stands in relation to the overall salary cap.
The actual payroll figure can be different and is contingent on the contract between the team and the player. Teams will manipulate the contract a bit to pay players differing amounts each season to accommodate their own payroll limitations, which is separate from the salary cap. The reverse can be done as well; teams can manipulate the contract in order to accommodate their cap limitations. See: Ilya Kovalchuck and the New Jersey Devils.
So where do the Stars stand, in reality?
Currently the Dallas Stars have 23 players under contract with a total salary cap hit of $46.8 million. Now these 23 players include Brad Lukowich and Philip Larsen, who are signed to two-way contracts. Right now it's unlikely that either starts the season in the NHL, although Larsen could impress (like Jamie Benn) and force his way onto the roster which would then likely send Woywitka down.* It's this $46.8 number that is standing out, especially with two players unsigned and a reported budget of around $46 million.
*For now, I'm not including Lukowich's and Larsen's NHL salary in the discussion on the payroll although it is included int the cap. It's an overall difference of around $1.3 million, so it's not insignificant, but I have to go with probability at this point.
But the important number here is the actual payroll numbers. This is what the Stars are going to be paying out this year and this is where the internal restrictions kick in. By my calculations, the Stars have a current payroll of around $43.2 million. There's probably about a $500,000 range in either direction, but that's about as good a guess as I can make with the information I have.
With this current payroll figure, that means the Stars have about $3 million in salary to work with in signing James Neal and Matt Niskanen. You have to think, based on what Grossman signed for, that this is more than doable for Joe Nieuwendyk and the Dallas Stars.
Say what you will about some of Nieuwendyk's decisions during his time as GM, but you have to respect what he's been able to do with a very restrictive budget over the past year. He's managed to hang onto the young players we were afraid might slip away, while still making some free agent acquisitions along the way. For every single contract Nieuwendyk has been able to negotiate, he has worked it so that the players' salaries are backloaded; this allows him more flexibility in the short term while still giving the players the overall deal they wanted.
The differences between actual salary and cap hit are usually minimal, but added up across the roster it makes a big difference. This has also given the Stars space to negotiate with Neal and Niskanen for a decent contract for both sides.
Myth #2: The Dallas Stars won't be able to afford an offer sheet for James Neal
Fact: The Stars have stated this is not a worry as they will match any offer.
This was the worry for fans for the very start. Sure, the team can give Neal a nice backloaded contract now and work out a more lucrative deal in the future, but what if some team swoops with a deal the Stars can't afford to match? I want to assure you that there is a 98% probability of that never happening and as each day goes by the percentage closes on 100%.
A couple of factors here: first, most teams are dealing with salary cap issues themselves. Have you noticed the amount of unsigned free agents floating around this summer? While the cap did increase this season, salaries have significantly jumped over the past few years and teams are having to do some mighty manipulating to stay under the cap. So the teams that could, in theory, want and afford Neal likely don't have cap space to make an offer at this point anyway.
You also have to think that if there were an offer to be made, it would have happened by now.
From the Stars standpoint, Nieuwendyk has maintained that he's not worried about not being able to match any offer that could potentially be made for James Neal. We sit here and scratch our heads at this because no matter what sort of salary manipulation might be done any offer the Stars have to match would almost certainly put them above that internal cap.
What seems to be at play here is the impending sale of the team. If forced to make such a move, Nieuwendyk would be banking on the sale of the team being completed before the contract started to be paid out; it's likely that the new owner would certainly be willing to increase payroll just a bit in order to accommodate keeping James Neal. This is certainly a gamble, but it's one that he would have to make.
Fortunately, the Stars won't be forced to make this sort of decision in regards to keeping Neal. Now if a team made an offer for Niskanen I wonder how much fight Nieuwendyk would have in him....
Myth #3: The sale of the Dallas Stars could be headed in the same direction as the Texas Rangers sale.
Fact: The sale of the Stars is proceeding normally, albeit a bit slower than expected
Any fan of the Dallas Stars witnessed what happened with the Rangers and grew wary. The sale of Tom Hicks' baseball franchise lasted nearly 14 months and was dragged into a nasty battle in bankruptcy court. Meanwhile, the Rangers were unable to conduct operations as normal while severely restricted in the moves they could make.
With the Stars looking at a bright future (yes, it is bright), could this be a possibility for Hicks' hockey franchise?
The short answer is no. I understand I jumped the gun a bit myself on this but after doing some extensive research (and also just reading Mike Heika) it's become very apparent that the sale of the Rangers and the sale of the Stars will be two completely different events.
For one, it's important to remember that the debacle surrounding the sale of the Rangers is unlike anything that has ever happened before in baseball, and likely in all of sports. The sale of the Phoenix Coyotes comes close.
From the very beginning, the sale process was incredibly complicated and was compounded by the fact that Tom Hicks was doing everything he could to sell the team yet still keep control of the franchise. While there were three bid proposals from three different ownership groups back in December, Hicks didn't choose the bid that would pay the most for team: he picked the bid that would benefit him personally the most.
Chuck Greenberg and Nolan Ryan were able to secure exclusive negotiating rights with Hicks by promising him a piece of the pie; Hicks would remain a minority owner of the team, he would still be involved and he would personally profit by selling real estate around the Ballpark as part of the deal. Looking back at the reports from over the winter, it's obvious that this is where everything went wrong. Hicks picked not the highest bid, but the bid that was best for him.
The Texas Rangers financial situation was incredibly more complex and certainly more damaged and disorganized than the Stars' will ever be. There were two outside entities with a vested interest in the sale of the team: the unsecured creditors that were owed money directly from the Rangers and the secured creditors that are tied to both the Rangers and the Stars, and in some cases just the Rangers.
When it became known that Hicks had picked a bid that benefited him more than the creditors that were owen $525 million in defaulted loans, that's when the problems started to arise. The creditors were concerned that the Greenberg bid wouldn't maximize the amount they would be paid, which is certainly understandable. Greenberg and Nolan Ryan attempted to alter their proposed deal to appease all sides, but now it's clear that Hicks and HSG were playing both sides.
So we go into in bankruptcy, we have an auction and Greenberg and Ryan end up purchasing the Texas Rangers for nearly $600 million.
Nothing anywhere close to this will happen with the Stars.
This first concern is whether the sale price of the team will be enough to appease the remaining creditors. Since the unsecured creditors for the Rangers were paid off first, there is still around $200 million owed to the secured creditors, which would presumably be covered by the Stars sale.* While there is more than just the team involved in the sale (AAC lease, Starcenters, etc), there is nowhere close to the complex situation that existed with the Rangers.
*Especially since it appears the sale of LIverpool FC won't help at all.
There is also the fear that the creditors could get involved in this sale in the same way they became involved with the Rangers sale. While the creditors are certainly going to be paying very close attention to this deal, there are a couple of very important factors to keep in mind on why the creditors won't have as much of an argument as they did with the Rangers sale.
For one, Tom Hicks will be able to pick the highest bid. Jim Crane supposedly had the best overall proposal for the Rangers but was forced to drop out when it became known that the MLB would not approve him as an owner. Second, Hicks won't have a personal interest; he picked Greenberg over Dennis Gilbert because that was the bid that kept him involved the most. Between Bill Gallacher and Tom Gaglardi, Hicks will be choosing between two owners that are guaranteed to be approved by the NHL and who have deep enough pockets to pay a significant price for the team.
This is the important part. The rumored sale price for the Stars will be anywhere between $275 and $300 million, which is certainly more than anyone thought the team would be worth. Considering the sale prices of the Coyotes and Tampa Bay Lighting, $300 million is an extremely high figure for a "southern market franchise". While the creditors could technically try and force the sale to cover the remain money they are owed, it's going to be tough for them to prove that this sale a) wasn't fairly bid between prospective buyers and b) that the final sale price wasn't fair.
There are still many factors at play here, especially when it comes to the payroll and salary cap, but for now this is how these current situations are shaking out as I see them.
Note: All salary cap and payroll figures come from CapGeek.com. All figures stated in this article are amateur calculations and shouldn't necessarily be taken as fact. When it comes to salary and payroll no figures are absolute certain. Overall payroll also includes minor league players and prospects under contract; these figures were not included in the calculations above. Sean Avery is also owed nearly $2 million a season for the next two years; this was not included either.