Attempting to make sense of the Tom Brady restructure that occurred on December 29th

Miguel Benzan
December 29, 2014 at 6:17 pm ET

On December 29th Adam Schefter reported that “In a deal turned into NFL today, Tom Brady restructured his contract to give NE $24 million more in cash to spend this winter, per sources.Under the new deal, Brady changed the $24 million in “skill” guarantee to only “injury” guarantee, meaning that Brady now would get the guaranteed money only if he were injured. Brady also now can be released from the Patriots without any liability, but he then would become an unrestricted free agent, free to command the type of guaranteed money he has agreed to surrender. This frees up cash for the Patriots to use on other players. New England needs the cash to help re-sign some of its own free agents such as Darrelle Revis, Devin McCourty, Nate Solder and Shane Vereen, amongst others.”

Please note that Adam only referred to cash in his report. He does not mention cap space at all.

Background information: In late February 2013 Tom Brady who was signed through the 2014 season agreed to an deal that extended his contract 3 more years so that he would be under contract with the Patriots through the 2017 season. In doing so he received a $30 million signing bonus and agreed to lower his 2013 and 2014 salaries while eliminating his $5 million roster bonus and $250,000 roster bonuses. Please note that under Brady’s old deal his 2013 $9.75 million and his 2013 offseason workout bonus would have become fully guaranteed the 5th day of the 2013 League Year (March 17th, 2013) and his 2014 $9.75 million and his 2014 offseason workout bonus would have been fully guaranteed if Tom Brady was on the Patriots roster the last week of the 2013 regular season. As part of the extension Brady’s 2013 and 2014 salaries were fully guaranteed. His 2015/2016/2017 salaries were guaranteed for only injury when Brady signed the extension. They became fully guaranteed when Brady was on the 53-man roster at 4PM Saturday, December 26. Per the CBA (Article 26,Section 9) since the Brady’s salaries became fully guaranteed, the Patriots were required to put into escrow with the NFL the $24 million.

Brady’s Old Deal
2013 2014
Salary $9,750,000 $9,750,000
Existing Signing Bonus Proration $6,800,000 $6,800,000
Roster Bonus $5,000,000 $5,000,000
Workout Bonus $250,000 $250,000
Totals $21,800,000 $21,800,000
Brady’s 2013 Extension
2013 2014 2015 2016 2017
Salary $1,000,000 $2,000,000 $7,000,000 $8,000,000 $9,000,000
Existing Signing Bonus Proration $6,800,000 $6,800,000
2013 Signing Bonus Proration $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000
Totals $13,800,000 $14,800,000 $13,000,000 $14,000,000 $15,000,000

Note: When a player is released or traded, the remaining amounts of proration in a contract accelerate into his team’s current salary cap. For example, if a player signs a five-year contract with a $10 million signing bonus, $2 million of his signing bonus counts towards the salary cap for each year of his contract. If he is released after the second year of his contract, the $4 million of signing bonus proration from the last two years of the contract automatically accelerates into the club’s current cap, which results in $6 million of dead money. There are two major exceptions to this general rule. Only the current year’s proration counts towards the cap with players released or traded after June 1 and before the trading deadline. The proration from the remaining contract years doesn’t accelerate until the next year. A team can also release two players each year prior to June 1st who will be treated under the cap as if they were released after June 1. This is known as a “Post-June 1 designation” – Source – Joel Corry’s piece about dead money

As part of this guarantee restructure Brady received a $1 million salary increase for the 2015/2016/2017 seasons.

Note that when a player with future guaranteed salaries is released all future guaranteed salaries immediately hit that year’s salary cap.

The next three tables show graphically the implications of first releasing Brady before today’s move and after and then lastly trading the best player in Patriots history. Please note that Brady’s guaranteed salaries did not contain an offset. That is, if released and signed by another team the Patriots would not received a credit the following year for the money paid to him by his new team.

Cap Implications of Cutting Tom Brady after this season before changing guarantee structure.Use these numbers while thinking about releasing an injured Tom Brady
Date Total to Keep in 2015 Total to Keep in 2016 Total to Keep in 2017 2015 Cap Number if Cut 2016 Cap Number if Cut 2017 Cap Number if Cut 2015 Cap Savings 2016 Cap Savings 2017 Cap Savings
During the 2015 season and before 6/2/2015 $13m $14m $15m $42m $0 $0 (-$29m) $14m $15m
During the 2015 season and after 6/1/2015 or given the June 1 designation $13m $14m $15m $30m $12m $0 (-17m) $2m $15m
During the 2016 season and before 6/2/2016 $13m $14m $15m $13m $29m $0 $0 (-$15m) $15m
During the 2016 season and after 6/1/2016 or given the June 1 designation $13m $14m $15m $13m $23m $6m $0 (-$9m) $9m
Anytime during the 2017 season $13m $14m $15m $13m $14m $13m $0 $0 $0
Cap Implications of Cutting Tom Brady after this season AFTER changing guarantee structure
Date Total to Keep in 2015 Total to Keep in 2016 Total to Keep in 2017 2015 Cap Number if Cut 2016 Cap Number if Cut 2017 Cap Number if Cut 2015 Cap Savings 2016 Cap Savings 2017 Cap Savings
During the 2015 season and before 6/2/2015 $14m $15m $16m $18m $0 $0 (-$4m) $15m $16m
During the 2015 season and after 6/1/2015 or given the June 1 designation $14m $15m $16m $6m $12m $0 $8m $3m $16m
During the 2016 season and before 6/2/2016 $14m $15m $16m $14m $12m $0 $0 $3m $16m
During the 2016 season and after 6/1/2016 or given the June 1 designation $14m $15m $16m $14m $6m $6m $0 $8m $9m
Anytime during the 2017 season $14m $15m $16m $14m $15m $6m $0 $0 $10m
Cap Implications of Trading Tom Brady after this season BEFORE the guarantee structure change
Date Total to Keep in 2015 Total to Keep in 2016 Total to Keep in 2017 2015 Cap Number if Traded 2016 Cap Number if Traded 2017 Cap Number if Traded 2015 Cap Savings 2016 Cap Savings 2017 Cap Savings
During the 2015 season and before 6/2/2015 $13m $14m $15m $18m $0 $0 (-$5m) $14m $15m
During the 2015 season and after 6/1/2015 $13m $14m $15m $6m $12m $0 $7m $2m $15m
During the 2016 season and before 6/2/2016 $13m $14m $15m $13m $12m $0 $0 $2m $15m
During the 2016 season and after 6/1/2016 $13m $14m $15m $13m $6m $6m $0 $8m $9m
Anytime during the 2017 season $13m $14m $15m $13m $14m $6m $0 $0 $9m
Cap Implications of Trading Tom Brady after changing guarantee structure
Date Total to Keep in 2015 Total to Keep in 2016 Total to Keep in 2017 2015 Cap Number if Traded 2016 Cap Number if Traded 2017 Cap Number if Traded 2015 Cap Savings 2016 Cap Savings 2017 Cap Savings
During the 2015 season and before 6/2/2015 $14m $15m $16m $18m $0 $0 (-$4m) $15m $16m
During the 2015 season and after 6/1/2015 $14m $15m $16m $6m $12m $0 $8m $3m $16m
During the 2016 season and before 6/2/2016 $14m $15m $16m $14m $12m $0 $0 $3m $16m
During the 2016 season and after 6/1/2016 $14m $15m $16m $14m $6m $6m $0 $9m $10m
Anytime during the 2017 season $14m $15m $16m $14m $15m $6m $0 $0 $10m

As you can see above, there was no point in time after this season in which the Patriots would save cap space by releasing Brady while he had fully guaranteed salaries. As you can also see above, starting on June 2, 2015 the Patriots will now be able to create cap space by releasing or trading Brady.

Per the CBA, teams like the Patriots cannot trade in 2015 players like Tom Brady until after the 2015 League Year begins. Before the 2015 League Year begins, the Patriots will have to decide on the following:

  1. Darrelle Revis – The Patriots have an option on Revis’ April 1, 2015 roster bonus. They must decide to pick up the option or not by the end of the 2014 League Year. Have created a blog post dedicated to examining Darrelle Revis’s comparables and proposing several different contracts for him and the Patriots.
  2. Brandon Browner – Brandon Browner earns a $2 million roster bonus if he is on the Patriots 90-man roster the first day of the 2015 League Year
  3. Vince Wilfork – Vince Wilfork earns a $4 million roster bonus if he is on the Patriots roster the first day of the 2015 League Year
  4. Rob Gronkowski – Gronk’s 2015 $4.75 million salary becomes fully guaranteed if he is on the Patriots roster the first day of the 2015 League Year. Also, if Gronkowski is on the Patriots roster the first day of the 2015 League Year there will be a $2 million proration of his 2016 million option bonus that will officially hit the Patriots 2015 cap.
  5. Nate Solder – Solder’s 2015 $7.438 million salary becomes fully guaranteed if he is on the Patriots roster the first day of the 2015 League Year.
  6. Devin McCourty – If the Patriots do not reach an extension with McCourty before the franchise tag deadline, they have to decide whether or not to place the franchise tag on Devin McCourty. Have created a blog post dedicated to examining McCourty’s comparables and proposing an extension between him and the Patriots.

Let’s say that the Patriots retain 3 or more of the 6 above players. What would the Patriots then trade Brady? Let’s say that the Patriots retain 3 or more of the 6 above players. Can they then afford to increase Brady’s 2015 cap number by 5 million?

Why would any of the six players work with the Patriots to redo their deals so as to lower their 2015 cap numbers.

Below are some questions that I expect this blog to create:

  1. Question: Why would releasing Brady before June 2nd in 2015 cause a $42 million dead money hit if his salaries were fully guaranteed? Answer: The $42 million is a total of the $18 million in remaining signing bonus prorations and the $24 million in guaranteed salaries
  2. Question: Did changing the structure of Brady’s guarantee from fully guaranteed to injury-only free up any cap space now?Answer:No It only lowers the dead money hit if and when a healthy Tom Brady is released. In fact, this restructure increases Brady’s cap numbers by $1 million each year.
  3. Question: How does this benefit the Patriots? Answer: It allows them to avoid putting $24 million in cash in escrow. Remember that Brady is not scheduled to receive some of the $24 million until the 2017 season. Not having $24 million tied up may allow the Patriots to offer their players and free agents larger than average signing bonuses or larger than normal fully guarantees as part of their deals. Removes the precedent of having a veteran having a fully guaranteed contract. It also helps them reach the 89% cash spending requirement for the years 2013 through 2016.
  4. Question: How does this benefit Tom Brady? Answer: Makes it easier for him to ask to be released, if he chooses to do so. May help the Patriots build a stronger team around him. Brady also gets $3 million more dollars out of this deal.
  5. Question:Does this move make it easier to cut a healthy Tom Brady?Answer: Yes. Please note that I consider Tom Brady as a top quarterback in the NFL and do not see the Patriots releasing a healthy Tom Brady any time in the near future. Plus, Tom Brady and the Krafts have a great personal relationship so if having a fully guaranteed contract was going to be the obstacle in getting released I am sure that Brady would have gotten rid of the guarantee if he did want to leave the Patriots in the future.
  6. Question:Does this move make it easier to cut an injured healthy Tom Brady?Answer: No. This deal has no impact on releasing an injured Tom Brady.
  7. Question:Does this move make it easier to trade Tom Brady?Answer: No. This deal has no real impact on trading Brady.
  8. Question:Did you think that this move would happen? Answer: Absolutely not. Was planning to blog how the Patriots could give Brady a signing bonus in the 10 to 18 million range while lowering his 2015 cap number. Do not see how the Patriots need cash-flow help.
  9. Question: When can the Patriots redo Jimmy Garoppolo’s deal? Answer: After the 2016 regular season.
  10. Question: How much dead money do the Patriots have for the 2015 season? Answer: According to my numbers – $4,616,819
  11. Question: What will be the salary cap in 2015? Answer: Heard projections that the 2015 cap will between $141 million to $144 million. As the 2015 League Year gets closer, we will hear more definitive numbers. Right around the start of the 2015 League Year is when we will find out the Patriots 2015 adjusted cap number. As I did last offseason I plan to predict the Patriots 2015 adjusted cap number this upcoming offseason. Right now I project the Patriots adjusted cap number to be about $2.3 million higher than the league cap, whatever the league cap number.
  12. Question: How would a $18 million dead money hit in 2015 rank in NFL history? Answer: According to my research it would be the largest dead money hit for one player in one season. I believe that the current high is Richard Seymour’s 2013 hit of $13.714 million.

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