by PuckStopsHere on 07/12/13 at 12:39 AM ET
Probably the biggest shock of the off-season is the retirement announcement of Ilya Kovalchuk. He is 30 years old and his contract with the New Jersey Devils runs until 2025. The New Jersey Devils have voided his contract with his signing of retirement papers. This allows him to play in any league outside the NHL. He is expected to sign with St Petersburg in the KHL - where he played during the lockout.
This is a surprise move but I will suggest motivations for why this may have occurred. Kovalchuk enjoyed his time in the KHL and was not enjoying playing in New Jersey. They are a non-playoff team and a lot of the blame for that falls upon his shoulders as their highest paid player. He leaves behind a significant amount of money by getting out of his contract. There is $77 million that he is due to still be paid. Obviously this is not a purely financial decision. Kovalchuk is already extremely rich from money he has already made playing in the NHL and he will be well paid in the KHL. There is an expectation that he may be paid as much as $20 million this year to play in the KHL and be taxed at a lower rate. In fact he is looking at a short term pay raise. Likely he will lose money longterm. I cannot imagine his salary remaining this high for well over a decade.
Kovalchuk probably approached the Devils and suggested that he wanted out. He wanted to play in the KHL and he was willing to retire to do so. His expectation may have been that he could be forced to sit out a season - but as Alexander Radulov shows us the KHL does not always honor NHL contracts. The Devils had a worry about Kovalchuk's contract. With the salary recapture provisions in the new CBA - where players who retire before a contract ends will have future salary cap hits based upon how their actual salary had exceeded the average value reported in their contract if they played the contract out until its finish. Kovalchuk was to be 42 years old when his front-loaded contract ends. If he retired, he would likely leave behind a large salary cap hit from salary recapture. Kovalchuk's contract is 15 years long and has a salary cap hit of $6.67 million. In the final five years, he is only paid $10 million in total so if he retires then there would be a large amount of money to recapture. The good news is Kovalchuk's contract is not front-loaded either. He was paid $6 million in the first two years of the deal and $11 million (had there been no lockout) as it begins to ramp up last year. This is $23 million over three years or a $7.67 million average salary. That means he was only paid $3 million above the average value over the contract and that money must be recaptured. It is to be recaptured over the 12 years remaining in the contract. $3 million / 12 years is $250,000 per year. That number goes up significantly if Kovalchuk continues to play into the contract.
Should New Jersey toll the contract, Kovalchuk will likely come back and play a few years someday but be older and closer to a real retirement. They would have a much larger dead amount to pay to salary recapture and have a lesser expected value from Kovalchuk as he will be an older player. Now is the time to kill the contract and Kovalchuk is breaching it. Thus the Devils chose to terminate the contract.
I expect that it is quite likely that Ilya Kovalchuk will be back in the NHL someday and he will play against New Jersey. That will be interesting. Right now he is likely the best player in the KHL. He is clearly the best player outside the NHL. He gives the KHL more credibility instantly and may lead to further players jumping in that direction. Kovalchuk was on a Hall of Fame track. He needs to keep playing out his career as it would have been projected to make it, but it looked quite likely that he would get there someday. It will be interesting to see if he can still follow that path. Imagine Kovalchuk in MVP of the Olympics and wins a few KHL MVPs in a row setting scoring records. Does that complete a Hall of Fame career? That is a lot to ask, but it is a possible scenario. Or is the situation more one of out of sight out of mind where Kovalchuk disappears into Russia and never does much that should attract attention? It will be interesting to watch.
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