LA Rams News: Restructuring Goff and Havenstein to pay FAs

Revisiting restructure vs reworked vs. renegotiated

While restructuring contracts does free up 2020 salary cap space for the LA Rams, it does not reduce the team’s money owed to the player. In fact, in many cases, it actually helps the player as it converts optional payment into guaranteed amounts. We discussed various cap issues when discussing Brandon Cooks’ trade. Now we have new twists to consider, restructure vs. renegotiate vs. rework.

Let’s discuss how that works. Let’s make up some numbers for QB Jared Goff.  In our example, Goff is due $10 million salary this year, has 5 years remaining on his 8-year contract’s  $40 million signing bonus, plus has a $20 million roster bonus due this year. His current salary cap is $35 million.  If the Rams cut him, they save his roster bonus and salary but must recognize all his remaining signing bonus. In this story, that means that the Rams save just $10 million.

But if the team restructures the contract, converting the $20 million roster bonus into a signing bonus, the team pushes $16 million of that salary into equal parts into the future. So restructure simply takes what is in the contract and reclassifies one bonus into another.

Reworking and renegotiating the contract can mean the same thing to some, but to me and my experience in finance, reworking the contract retains the value of the contract but resets the categories. In essence, a reworked contract in the above story will take the $10 million salary and the $20 million roster bonus, and reclassify them as signing bonus as well. That saves the Rams $24 million but pushing all those dollars into the future in equal parts.

Renegotiating a contract is where everyone sits back down to the bargaining table and a new contract is written up from scratch, replacing the previous agreement entirely. While any unrecognized money from the previous contract will fall on the current year, the dollar values can now change. In short, the salary can be changed to $2 million and the roster bonus can be shaved to $4 million, also saving the team $24 million while not pushing any salary cap dollars into future years.

In the end, the Rams found their money. But the team may want to sign new free agents to round out the current roster. To do so, the team will need to make additional salary changes.