Math not adding up for Pens, Letang
The Penguins and Kris Letang look like they are not far apart financially.
Negotiations between Penguins general manager Ray Shero and Letang's agent, Kent Hughes, continued Friday. Both sides strived to keep details quiet because of a perceived negative impact on negotiations, which were described as tense by multiple sources.
Letang is unhappy with a perceived slight by members of Penguins management and the coaching staff after the Tribune-Review reported that Paul Martin rated as the club's top defenseman last season.
The Penguins are not pleased with reports that Letang had scouted other clubs by consulting with opposing players.
Letang is under contract for next season, and there remained Friday no firm decision by Shero to trade him before the NHL Entry Draft on Sunday.
There also remained a financial gap that was unavoidable because of the NHL's new labor contract.
The Penguins are willing to pay Letang around $7 million annually on a max-term deal of eight years. Shero expressed that to Hughes before presenting an offer late Wednesday.
Hughes countered late Thursday with a proposal to pay Letang around $7.5 million annually over eight years.
Shero swiftly rejected that salary figure.
The Penguins are willing to provide Letang a full no-movement clause – something they previously were set on only giving franchise centers Sidney Crosby and Evgeni Malkin. However, as with the case Crosby and Malkin during their negotiations for a third NHL contract, Letang must accept a “hometown discount” to get that clause.
Exactly what constitutes a discount was one of the major sticking points between the sides.
Letang, 26, is similar in age to the two defensemen who negotiated megadeals last summer – though those were agreed to under the old labor contract, which did not restrict length and allowed for front-loaded payouts.
Shea Weber, then 26, re-signed with Nashville for a total of $110 million over 14 years. His cap hit is $7.86 million, but he will make $92 million over the first eight years of that contract.
Ryan Suter was 27 when he signed as a free agent with Minnesota. His deal was for $98 million over 13 years with a $7.54 million cap hit, but his first eight years will bring in $68 million.
Letang has repeatedly said he understands the deals for Weber and Suter cannot set an exact precedent for his third NHL contract because of the limitations from the new labor contract.
Still, he is among the majority of people within the NHL community that anticipates a big bump for the salary cap after next season – and that prospect has altered his calculations.
Commissioner Gary Bettman said during the Stanley Cup Final that league revenues for next season will at least match the record $3.3 billion from the year before the recent lockout. During the last labor contract (2005-12), an increase in league revenues always caused the cap to increase.
The cap is set at $64.3 million for next season. Letang is slated to become an unrestricted free agent next summer, when general managers are expecting to have anywhere from $3-$6 million in additional cap space.
Hughes is confident that Letang, a Norris Trophy (top defenseman) finalist for the first time, would generate offers starting at $8 million annually if he played out the final year of his current deal and tested the open market. Thus, the counterproposal that was rejected by Shero actually did provide the Penguins a “hometown discount” with that $7.5 million average value.
Letang wants to be in the financial company of Weber and Suter. The labor contract makes it nearly impossible for him to command the total money they will take in on the first eight years of their respective deals. Hughes' counter to the Penguins used the Weber/Suter cap hits – determined by overall average value – to bring Letang into that neighborhood.
The Penguins, though, have already internally discussed a self-imposed cap for Letang – and at around $7 million annually, it exists outside of the Weber/Suter neighborhood.
At that number, Letang feels he might be sacrificing at least $1.5 million annually, or $12 million overall, by staying with the Penguins on an eight-year deal.
That is a hit that could last a lot longer than any perceived slight.