Explaining a restructure

Miguel Benzan
February 4, 2014 at 10:23 pm ET

I like to thank the Ickster for creating this article and for allowing me to post it.

A restructure of a contract doesn’t include additional years, an extension does. If you extend a player an additional year, that does not affect the spread of his existing bonus. Any new bonus money is spread into the new year. Usually what happens for an extension is the current year salary is cut and a signing bonus is paid. That results in a greater commitment to the player (making him harder to cut and limiting cap flexibility) and more money pushed into the future.

If a contract has already been restructured, money is converted into bonus which pushes it into future years. For an extension, you can cut the salary, but the bonus money cannot then be re-spread over the life of the new contract. If a contract is heavily leveraged (has been restructured in the past), that limits how much you can gain by a restructure or extension in the future because the amount of bonus has increased and that cannot be spread into future years.

For example, If a player signs a 3 year deal for $12M with a $3M signing bonus, his bonus money counts for $1M for three years. If, in the 2nd year, $2M in salary is converted to bonus (pushing $1M into the final year), that provides $1M in cap relief but raises his bonus allocation to $2M for the final year. If you then go to extend the player, that $2M in unallocated bonus from his original contract can’t be spread into additional years. His new bonus (for the extension) can be spread. Thus, his cap number at the start of the contract is the $2M in bonus from his original contract, partial allocation of his new bonus and at least minimum salary. You can’t get around the cap hit, regardless of the players age.

Finally, no player with any contract leverage at all is going to accept adding a year on his deal without a sizeable signing bonus. The only security a player has in the NFL is signing bonus money. It is the only thing he is guaranteed to collect, because it is paid up front. For a player to push the date he is due for free agency, even if it is just a year, he will want some serious cash up front, if he is a good player. These guys are mercenaries, they want cash up front.”

Here’s an example of a restructure

Mankins’ cap numbers
2014 -$10,500,000 – 6.25m salary +250K workout bonus + 4m prorated signing bonus
2015 – $11,000,000 – 6.75m salary +250K workout bonus + 4m prorated signing bonus
2016 – $7,000,000 – 6.75m salary +250K workout bonus

1.) Converting all but $855,000 of his $6.25m salary and workout bonus money ($250,000) to a signing bonus would have changed the above numbers to
2014 – $6,736,666 (a $3,763,334 savings) – 855,000 salary + 5,881,666 prorated signing bonus
2015 – $12,881,666 – (a $1,881,666 increase) – 6.75m salary +250K workout bonus + 5,881,666 prorated signing bonus
2016 – $8,881,668 – (a $1,881,668 increase) – 6.75m salary +250K workout bonus + 1,881,668 prorated signing bonus