Why Penguins’ Jake Guentzel, if traded, could provide haul for third-party brokers

Frank Seravalli
Frank Seravalli(frank_seravalli)
Why Penguins’ Jake Guentzel, if traded, could provide haul for third-party brokers
Credit: Jake Guentzel (© Charles LeClaire-USA TODAY Sports)

We’re three weeks away from the NHL’s Trade Deadline on March 8, so we’re bringing you one deadline-focused story each day at Daily Faceoff.

Today we’re going to focus on the salary cap picture and how, in another season with so little space to go around, a select group of teams can weaponize their remaining money to harvest assets and help playoff-bound teams process trades.

With the salary cap set to increase more than $4 million this summer for the first time since 2019, this may be the last deadline for a while with such an emphasis on third-party brokers.

2024 Trade Deadline Countdown: 21 Days

Let’s start with a little background.

History of Third-Party Brokers

The NHL and NHL Players’ Association began allowing teams to retain salary in transactions starting in 2013. But it took until 2018 for NHL teams to get creative enough to push this allowance a step further, involving trading a player to a third team so that the third team could also retain a portion of his salary, before sending him to his final destination.

The Vegas Golden Knights were the first team to do it, helping Ottawa broker Derick Brassard to Pittsburgh.

The third team involved in the trade parks a portion of that player’s salary on their salary cap for the remainder of the season. The player actually receives a portion of his salary in his paycheck from that team. In exchange for their services, the “third-party broker” receives an asset, historically a mid-round draft pick.

NHL teams can retain a maximum of 50 percent of a player’s salary in a transaction. However, the third-party broker can also retain a maximum of 50 percent. So the acquiring team – usually a contender who is tight to the salary cap limit – can receive the player at just 25 percent of his originally stated AAV.

Teams are only allowed to retain salary on a maximum of three contracts each season. In the NHL, cap space is “use or lose,” so unless ownership has set internal budget limitations, there is little reason to not use every dollar available to bring back a draft pick. It is essentially “buying” a draft pick with real cash. Might as well use it, you can’t take your remaining space with you to next season.

Why Third-Party Brokers are Critical

We called last deadline the Year of the Third Party Broker because there were multiple high-priced contracts potentially on the move, like Patrick Kane and Jonathan Toews. Kane was involved in a third-party transaction, with a portion of his pay parked in Arizona for the final 42 days of the season.

This year, there is still a need, but it’s not as heightened because while some players (Adam Henrique and Jake Guentzel) will likely require a third party, many of the players available on this year’s market can be moved by just their own team retaining half.

According to CapFriendly, 24 of the league’s 32 teams are operating within $2 million of the limit. Some 14 of them are operating in LTIR, which means they technically have no cap space and are not accruing cap space on a daily basis.

How does it work? Here’s a real world, hypothetical example:

Pittsburgh trades Jake Guentzel to Edmonton with Chicago acting as a third-party broker.
Guentzel’s cap hit is $6 million.
> Pittsburgh retains 50 percent: $3 million
> Chicago retains 50 percent of the remaining $3 million: $1.5 million
> Guentzel arrives in Edmonton with $1.5 million salary cap hit.

Keep in mind, those dollar amounts listed are for cap purposes, and not actual dollars. Our illustration subject, Guentzel, has a salary this season equal to his cap hit. Sometimes players in a given season earn more or less than their cap hit, which is the average of the total deal.

There are 192 days in this season and on March 8, there will only be 42 remaining, so 78 percent of that original $6 million has already been paid in real cash by the Penguins and the retaining and acquiring teams will only be paying pro-rated percentages on what is remaining.

That is one reason why some teams like to wait as close to the deadline as possible to acquire a player. If they have cap space, they accrue more each day, and each day the player is paid on another team’s cap and by that team, he costs less in real and cap dollars.

What can a Third-Party Broker get in return?

According to CapFriendly, there have now been 10 trades in league history brokered by third parties. Prior to last year, the third team has received anywhere from a fourth to sixth-round pick, dependent on how much cap space and cash was retained. But last year, the Arizona Coyotes became the first team ever to receive a third-round pick acting as a third-party broker.

Here is the breakdown:

March 3, 2023: Nick Bonino from San Jose to Pittsburgh (through Montréal)
Third-party broker: Canadiens
Pick received: 2024 5th Round Pick
Salary cap space retained: $232,703
Real cash cost: $232,703

Feb. 28, 2023: Patrick Kane from Chicago to NY Rangers (through Arizona)
Third-party broker: Coyotes
Pick received: 2025 3rd Round Pick
Salary cap space retained: $624,324
Real cash cost: $658,378

Feb. 23, 2023: Dmitry Orlov from Washington to Boston (through Minnesota)
Third-party broker: Wild
Pick received: 2023 5th Round Pick
Salary cap space retained: $337,703
Real cash cost: $295,135

Feb. 17, 2023: Ryan O’Reilly from St. Louis to Toronto (through Minnesota)
Third-party broker: Wild
Pick received: 2025 4th Round Pick
Salary cap space retained: $557,432
Real cash cost: $227,027

March 21, 2022: Max Domi from Columbus to Carolina (through Florida)
Third-party broker: Panthers
Pick received: 2022 6th Round Pick
Salary cap space retained: $1.325 million
Real cash cost: $265,000

April 12, 2021: Mattias Janmark from Chicago to Vegas (through San Jose)
Third-party broker: Sharks
Pick received: 2022 5th Round Pick
Salary cap space retained: $562,500
Real cash cost: $130,297

April 11, 2021: Nick Foligno from Columbus to Toronto (through San Jose)
Third-party broker: Sharks
Pick received: 2021 4th Round Pick
Salary cap space retained: $1.375 million
Real cash cost: $320,043

April 10, 2021: David Savard from Columbus to Tampa Bay (through Detroit)
Third-party broker: Red Wings
Pick received: 2021 4th Round Pick
Salary cap space retained: $1.0625 million
Real cash cost: $265,625

Feb. 24, 2020: Robin Lehner from Chicago to Vegas (through Toronto)
Third-party broker: Maple Leafs
Pick received: 2020 5th Round Pick
Salary cap space retained: $1.1 million
Real cash cost: $242,473

Feb. 23, 2018: Derick Brassard from Ottawa to Pittsburgh (through Vegas)
Third-party broker: Golden Knights
Pick received: 2018 4th Round Pick
Salary cap space retained: $2 million
Real cash cost: $462,366

Armed with this data, we can tell you that historically, the real cash cost to buy a draft pick by acting as a third-party broker is somewhere in the neighborhood of:

3rd Round Pick: $650,000
4th Round Pick: $350,000
5th Round Pick: $185,000
6th Round Pick: $125,000

Given that the Carolina Hurricanes paid $833,333 in real cash dollars to take on Patrick Marleau’s contract in 2019, which brought them the 2020 No. 13 overall pick (Seth Jarvis), we can attempt to estimate the value of these picks in real cash cost:

1st Round Pick: $800,000+
2nd Round Pick: $675,000-799,999
3rd Round Pick: $500,000-674,999
4th Round Pick: $350,000-499,999
5th Round Pick: $185,000-349,999
6th Round Pick $125,000-184,999
7th Round Pick: $100,000<

Interestingly enough, even though we saw a third-party deal brokered last year with a cap hit at the level of Kane at $10.5 million, the real cash cost to retain on Guentzel this year ($1.313 million) will be nearly twice as much as Kane last year, since Kane dropped down to $2.9 million in salary in the final year of his deal.

In other words, if Guentzel gets traded and he will require a third party broker to move this year, that brokering team could net a record return in terms of draft pick. Cha-ching!

Which teams will be in the Third-Party Broker game?

Let’s rank them in order of perceived interest and ability:

1. Chicago Blackhawks
Projected Cap Space: $40.8 million
Retained Slots Left: 2
The Blackhawks can wield their financial muscle and add additional draft capital. They don’t have many (if any) players on their roster who they’d like to retain on outside of Tyler Johnson, which would open them up for business.

2. Minnesota Wild
Projected Cap Space: $4.5 million
Retained Slots Left: 3
You’d have to figure the Wild will be interested in playing again, as they helped broker two trades last spring in the matter of a week. The only difference is Assistant GM / cap guru Chris O’Hearn is no longer with the team. Their results relative to market prices were mixed last year, did well in the O’Reilly deal, not as much on Orlov.

3. Anaheim Ducks
Projected Cap Space: $38.5 million
Retained Slots Left: 3
Ducks GM Pat Verbeek has already reportedly set the asking price for him to retain half on Henrique at a third-round pick. That seems like a fair price, according to our math, and will leave him two remaining slots.

4. Pittsburgh Penguins
Projected Cap Space: $3.85 million
Retained Slots Left: 2
The Penguins, who appear to be embarking on a looooong rebuild, will want to accumulate as much draft capital as possible. Assuming they retain on Guentzel, and assuming he moves, that will give them one opportunity left to do so.

5. Montréal Canadiens
Projected Cap Space: $5.65 million
Retained Slots Left: 1
The Habs are always checking market prices on the third-party broker game. They only have one retention slot left, though, and they might want to use that on Jake Allen. If Allen is staying, you can bet they’ll be in it.

6. Philadelphia Flyers
Projected Cap Space: $7.9 million
Retained Slots Left: 2
GM Danny Briere is shrewd and he has weaponized the Flyers’ enviable financial backing to pull off trades already, reshaping Philadelphia into a likely playoff team this year, despite rebuilding.

7. Washington Capitals
Projected Cap Space: $11.8 million
Retained Slots Left: 3
The Caps are clearly on the downswing, and after going for it for so long, they could be in a position to make things happen and get extra picks. Why not?

Also considered: Buffalo, Columbus, Detroit, St. Louis, New Jersey.

Watch out for…

Will any playoff-bound teams decide to get in the market and flex any potential salary cap space and retained transaction slots? The Wild did it last year, utilizing their use-or-lose LTIR space, and still managed to add some players at the deadline (John Klingberg) on top of that. It would make sense for Winnipeg, Carolina, Florida and others to get in the game and recoup some picks after trading some away. It’s not an apples-to-apples replenishment, of course, but each late-round pick is another lottery ticket.

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