Restructuring Roy

Amidst all of the excitement surrounding the Paulino-Jaramillo deal, the Waechter/Farnsworth/Horacio signings, and the impending fate of Ramon Vazquez, many of us missed the interesting scenario presented by one Roy Oswalt. The 31-year old ace of the Drayton Gang has expressed interest in restructuring his contract. Roy wants to win and feels that his salary may hinder GM Ed Wade from signing someone like Ben Sheets.

Oswalt is due to earn $14 mil in 2009, $15 mil in 2010, and $16 mil in 2011. All three of those seasons are guaranteed under the 5-yr/$73 mil contract extension he signed during the 2006 season. The deal also includes a club option for 2012 worth $16 mil, that Oswalt can opt out of for a buyout lower than the $2 mil designated by the team. The exact details of his proposal are not known, but Richard Justice is speculating that it may involve Oswalt decreasing his 2009 salary to something like $6 mil in exchange for a couple more years added to the current deal.

Restructuring contracts is very tricky, because the Players Union is not very likely to allow a player to receive less than he signed for. However, this sort of restructuring is not entirely taboo. In fact, one instance of such a move occurred in 2006 with Tom Glavine and the New York Mets. Glavine had signed a 4-yr/$42.5 mil deal to pitch in New York from 2003-2006. He was set to earn $10.5 mil in 2006, but restructured the deal to pay him $7.5 mil. Added onto the contract were options, both club and player, for the 2007 season.

Initially, Glavine’s $10.5 mil included half of the money deferred at 6% interest. Upon restructuring the deal to $7.5 mil, the deferred total fell to $2.5 mil, meaning that, no matter what, he would earn $5.25 mil and then the rest of that year’s salary deferred at 6% interest. The player option for 2007 would earn him $5.5 mil with an increase of $1 mil each for logging 180, 190, and 200 innings. The club option was worth $12 mil. In either case, if his salary fell below $14 mil, he could earn that amount through bonuses and incentives.

In essence, Glavine restructured his deal to pay him a lower fee in 2006, yet guarantee himself security for the 2007 season.

Oswalt is likely looking to do something similar, in terms of trading current money for a bit of extra security in the future. Perhaps he will not look to reduce his 2009 salary by $8-9 mil, but I can definitely see him renegotiating to earn something like $8 mil in 2009 in exchange for the 2012 season becoming guaranteed and the option shifting to 2013.

Oswalt had a “down year” in 2008, but Marcel projects him at a 3.70 FIP in 185 IP. Translated to runs and wins, as well as a slight bonus for pitching that amount of innings, Oswalt’s true talent level calls him a +3.7 win pitcher next season. Were he to sign a 1-yr deal at fair market value, the deal would be close to $18 mil. He is already signed to a deal that “underpays” him, and now he is looking to earn even less than that so the team has a better shot at competing next season.

Who knows if anything will come of this, as Ed Wade has not publicly discussed the situation, but it sure would be interesting if the team could afford Ben Sheets due to Oswalt restructuring. He could not accept a paycut, as the union prohibits such practices. His decreased salary in 2009 would have to be made up for in the form of more money and/or years down the road.

Drayton does not want to go over $100 mil on his payroll, and his supposed unwillingness to be flexible bugs me. The team was not that good in 2008, vastly outperformed their talent level, and realistically has little chance at contending in 2009. Signing someone like Sheets will not guarantee them the division or wild card, but at the very least shows someone like Oswalt that the team is serious about winning. Regardless, I find it quite odd that McLane wouldn’t be willing to up the payroll by whatever it takes to sign Sheets, or someone along those lines.




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Eric is an accountant and statistical analyst from Philadelphia. He also covers the Phillies at Phillies Nation and can be found here on Twitter.

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