Bill Me Later: Backloaded Multiyear Deals

Most multiyear free agent contracts are backloaded to some extent.  For example, Adam Dunn's four-year, $56MM deal has an average annual value of $14MM but pays the player $12MM in 2011.  The White Sox will pay Dunn about 85% of his deal's AAV in the upcoming season, which reflects the average first-year percentage for the 36 multiyear deals signed so far this offseason.

Some teams have opted for a more drastic "bill me later" plan, however.  The biggest example is the Phillies' five-year, $120MM deal with Cliff Lee.  That works out to $24MM a year on average, but they'll pay him only $11MM in 2011 – just 46% of the AAV.  The backloading is accomplished by $25MM salaries in the final three years, plus what appears to be the biggest option buyout ever at $12.5MM.  The deals for A.J. Pierzynski, Jayson Werth, and Orlando Hudson are other examples of heavily backloaded contracts that pay the player less than 70% of the AAV in 2011.  Including part of his signing bonus, Werth will make only $12MM in '11.

Dodgers GM Ned Colletti did some big-time backloading this winter in his three-year deals for Matt Guerrier, Ted Lilly, and Juan Uribe.  Overall the trio will be paid 67% of their AAV in 2011.  Lilly, for example, will make only $7.5MM in 2011 but $12MM in '12 and $13.5MM in '13.

Teams can also pay later by negotiating deferred money into the contract.  This is the case with Derek Jeter, Mariano Rivera, Paul Konerko, and even Carlos Pena's one-year deal.  These deferrals are often without interest, so the team benefits greatly.

Some teams prefer balanced contracts.  Including his signing bonus, the Red Sox are paying Carl Crawford a full $20MM in 2011, almost the same as his AAV.  They didn't backload Bobby Jenks' deal either.  The contracts for Victor Martinez, Aubrey Huff, and Jorge de la Rosa are also spread out evenly. 

Thanks to Cot's Baseball Contracts for contract details.  Click here to download a spreadsheet used to create this post.

Leave a Reply

Be the First to Comment!