Quick Hit: The Economics of Trading Christian Ehrhoff

Source: Canucksarmy.com

Well, that escalated quickly. With Ryan Miller and Steve Ott shipped off to the Blues, the Tim Murray era is off with a bang with more moves expected ahead of the March 5th trade deadline. Forthcoming UFAs Matt Moulson and Henrik Tallinder are expected to follow Miller and Ott out of Buffalo, with virtually every player (save for Zemgus Girgensons) available for the right price. That would include the two newest Sabres - Jaroslav Halak and Chris Stewart - acquired from St. Louis, as well as Christian Ehrhoff, who submitted his list of eight teams he wouldn't accept a trade to earlier this week.

As with Pominville last year, Ehrhoff's no trade list does not necessitate that he will be traded before Wednesday, but gives Murray the ability to see what he can get in return from the 21 teams where Ehrhoff can be traded. Though the the salary cap will increase for the 2014-15 season (speculation says the 2012-13 level of $70 million is a fair estimate), just how much is still unknown. As a result, GMs enter Wednesday's trade deadline weary of taking on term - to which Ehrhoff's remaining 7 years will be an issue. However, the bigger issue will be Buffalo's willingness to lose certainty over Ehrhoff's cap recapture penalty in the expected event that he retires before the term of the contract is up.

From a hockey perspective, Ehrhoff has been one of the team's few bright spots during his tenure with the Sabres. Sabres blog The Hosers did a really nice job last year showing how much better Ehrhoff's 2013 Sabres teammates controlled the puck with Ehrhoff on the ice vs. without him:

 I'd imagine Sekera would look favorably on an Ehrhoff trade to Carolina.
Source: TheHosers.com

While Ehrhoff's possession stats are down this year, he has taken on greater responsibility in defensive zone starts and playing time on the PK due to hemorrhaging of the Sabres roster over the past calendar year. Should the Sabres try to push their luck and bottom out in 2015 to win the Connor McDavid sweepstakes, trading away Ehrhoff is arguably the second most effective way to do that after trading Ryan Miller. The reason for keeping Ehrhoff, however, may less so lie in staying competitive than the structure of his contract providing little incentive to move him: 

With regards to trading Ehrhoff, sure, what team wouldn't want to free themselves of seven years worth of salary? Well, as many hockey fans know, teams that benefited from the weighting / front-loading of contracts seven years or longer stand to be penalized the amount of cap savings upon the player's retirement thanks to the cap recapture rule under the new CBA. To date, the Sabres have benefited $10 million from the difference in Christian Ehrhoff's contract relative to his cap hit. The good news for trading away Ehrhoff is that the Sabres have already realized the whole benefit from front loading the deal. The bad news for Buffalo is that the cumulative cap benefit remains at $10 million until the 2017-18 season - at which point it only decreases to $9 million:

The 2018-19 season is when Ehrhoff will start making $1 million dollar in annual salary and likely mark his retirement from NHL if Miikka Kiprusoff's recent retirement is a cautionary example. Even if Ehrhoff plays past 2018, his retirement before 2021 would leave Buffalo with a per year cap penalty $3 million:

Under cap recapture, should the Sabres trade Ehrhoff, the cumulative cap benefit (i.e., $10 million) will be frozen and spread out following the player's retirement from the NHL. While this would have little effect on the Sabres cap situation should Ehrhoff retire ahead of the 2018-19 season like his contract incentives him to, his retirement following the 2018-19 or 2019-20 seasons could be considerably damaging to Buffalo's cap situation:

Contrast Ehrhoff's situation with Marian Hossa's for a minute. The Blackhawks, who have realized a cumulative cap benefit of $13 million to date, have incentive to "freeze" the benefit and trade Hossa this season, as opposed to incurring an additional $5 million cap benefit over the following two seasons:

While Chicago, like Buffalo, incurs the risk of Hossa retiring with 1-2 seasons remaining on the deal and hurting Chicago's cap situation the most in those seasons, the upshot of Hossa likely retiring with four year left on the deal (prior to 2017-18, when he is scheduled to start making $1 million in annual salary) would cost Chicago about $1 million less per season should they trade Hossa instead of holding on to Hossa until his retirement date. Given Hossa is one of the few players on Chicago without a no trade clause and the Blackhawks already used compliance buyouts on Steve Montador and Rostislav Olesz in the 2013 off-season, his contract could very well push him out the door this upcoming offseason.

Source: NHL.com

Circling back to the Sabres, there is an upshot to the dilemma of trading Christian Ehrhoff. If Tim Murray knows that Ehrhoff isn't in Sabres' plans past 2018, or if the player is likely to want a trade before that time, then the Sabres can confidently trade him when they can get the best value knowing that the future cap recapture penalty is a sunk cost. Given Ehrhoff is 31, that time is likely to be this trade deadline or off-season, where Ehrhoff has more useful seasons at a modest $4 million cap hit remaining in the NHL versus dead years.

As far as an acquiring team is concerned, there is no cap recapture or long-term salary left on the books from acquiring Ehrhoff - the biggest risk is that he outruns his usefulness before he decides to retire. For an acquiring team, there could even an out here: a hypothetical buyout of Ehrhoff for 2017-18 or a subsequent season, when his annual salary falls to $1 million a year, is very reasonable in terms of money coming out of the owner's pocket as the buyout cost teams roughly two-thirds in salary. Given the buyout additionally counts roughly two-thirds in cap hit, a buyout of Ehrhoff's contract could even be an attractive proposition for a small market team struggling to keep up with an escalating salary floor. But I am getting ahead of myself.

Given Ehrhoff's on ice play, affordable cap hit and and modest $3 million cap penalty in what could eventually be a $90 million salary cap world, I would personally lean towards not trading him. The potential for the $10 million cap recapture to be concentrated in just one year is extremely frightening. However, given the likeliness that Ehrhoff and the Sabres will wish to part ways with each other before Ehrhoff's cap penalty will start to reduce (2017), the best course of action is probably to accept the cap penalty as a sunk cost and shop Ehrhoff to the highest bidder. Whether Tim Murray can find a trade worth taking is another story.