Penguins First Step Toward Malkin, Letang Contracts; New Rule Makes it Easier

The Pittsburgh Penguins seemingly took the first step toward negotiations with core players Evgeni Malkin, Kris Letang, and Bryan Rust when they hired a new Director of Hockey Operations on Tuesday. The team hired Alex Schall, who will be responsible for contract negotiations and salary cap management.

And three big expiring contracts are staring the Penguins in the face.

New Director of Hockey Operations Alex Schall was the agent for James van Riemsdyk and Joel Farabee when each signed their contract with the Philadelphia Flyers, and then-GM Ron Hextall, who is now the Penguins GM. So, one would think that Schall earned some serious respect points for how he handled negotiations.

Schall did get van Riemsdyk $7 million per season on a five-year contract.

Now, Schall will play an integral role in what could be the most-watched veteran contracts in the NHL. Players will three Stanley Cup rings and a future display at the Hockey Hall of Fame don’t often hit the open market. Evgeni Malkin and Kris Letang have one year remaining on their deals. Top-line winger Bryan Rust who has evolved from fourth-line speedster to top-line scorer, will also be a UFA after the coming season.

We’ll dive into Rust’s situation in the coming days. His contract valuation and age merit a full review. For now, we’re looking at the effects and hurdles of signing Letang and Malkin.

Decisions, Decisions…

And it surely seems the Pittsburgh Penguins franchise will come to the fork in the road.

The summer of 2022 could be the turning point in the franchise. The Penguins have about $46 million committed to 10 players, which means the Penguins could see a greater than 50% turnover by 2022-23.

That’s more than a wholesale line change, but what will become of Malkin, Letang, and Rust?

PHN spoke with numerous industry sources in June regarding Evgeni Malkin and his next contract value. The league view is not nearly as rosy as you may expect, and it bordered the same pessimism shown in comments and message boards.

Read the full exposition and Malkin valuation here. 

Schall will be on the front lines, presumably trying to get Malkin under contract. Hextall has said on multiple occasions that mid-August would be when the Penguins revisit contract discussions with the trio.

So, here we are.

Mid-August.

First, there are a few conditions the Penguins must meet with Kris Letang’s or Evgeni Malkin’s contract to avoid disaster down the road. The deals should not be front-loaded or include signing bonuses, performance bonuses, or the like. Why? The league rules on contracts for players who are 35-years-old or older have been tweaked.

Previously, if a team signed a 35+ contract, that contract counted against the cap until it expired regardless of the player’s status. Even if the player was bought out or retired, the contract counted against the cap.

As of 2020, the league amended the harsh penalties. Our friends at Pension Plan Puppets, one of the stalwarts of the blogging community, laid it out well. Now, as long as the contract meets NHL rules and doesn’t unfairly front load the contract allowing a team to pay a player more than the AAV, a player over 35-years-old can sign but not finish his contract without drastic penalties to the team.

In other words, as long as the Penguins keep Malkin’s contract at an even salary without bonuses, the Penguins can sign Malkin to a longer deal, and he can retire or leave for the KHL, as his wife said he would do to finish his career. 

Does that change a three-year deal to a four-year deal and lower AAV? We think so.

Evgeni Malkin, Possibles:

The 2020 CBA §50.5(d)(i)(B)(5) could, in fact, allow the Pittsburgh Penguins a bit of bargaining power to sign Malkin to a fourth-year that neither the team nor player has any intention of fulfilling, but keeps the options open.

Or it allows Malkin to accept he cannot take the NHL rigors any longer and head to Team Putin at will without damaging the Penguins cap structure.

If the league perception is somewhat correct, and Malkin is only worth a few million on a short-term deal, that extra year could make the difference. For example, a five-year, $20 million deal will pay $12 million in three years but cost only $4 million against the salary cap in those three years, not years four and five.

Tada! Player gets paid for three years. The team gets away without penalty, and if there’s interest in continuing, it’s there without drama.

The ultimate “what if” involves Malkin’s now surgically repaired knee. If it’s not up to par or falters again after the contract is signed, the Penguins would not be on the hook for millions.

That’s a huge change in the rules and makes the Penguins able to repay Malkin’s loyalty without as much fear.

Kris Letang, More Complicated

We haven’t yet completed our survey of league sources on Kris Letang, though we expect far more varied answers. Letang is still an elite defenseman with a right-handed stick, and even mediocre RHDs are getting paid handsomely on the open market.

Letang has finished in the top-10 of Norris voting in two of the last three years. In 2020, he finished “only” 17th. In 2019 and 2021, he also finished in the top-10 of All-Star voting (end of season votes, not fan voting).

His elite conditioning, the Penguins’ lack of an heir apparent, and high-level performance probably mean Letang has all the leverage in negotiations.

Just how badly does he want to remain with the Pittsburgh Penguins? Eight years ago, Letang took what everyone knew to be a team-friendly deal. He was coming into his prime but settled for a $7.25 million AAV.

Will he be so team-friendly for a team on the verge of significant turnover?

Despite message board and comment sections, the hockey world well regards Letang and properly praises his contributions. Perhaps his flowing hockey hair and fawning female fans early in his career created a contentious fanbase in Pittsburgh that dwells on imperfections, real and imagined?

Everyone has thus far been tightlipped around the situations. We’ve heard second-hand whispers, but Hextall’s changing inner-circle also means there are new opinions and thoughts from Hextall loyalists, who are good at keeping quiet. What was chatter then is now no more relevant than an old photograph.

Tomorrow–Kris Letang contract values and comparables…