Transaction Analysis: Explaining Bonk's Entry

May 30, 2023

Selected by the Flyers with the 22nd overall pick in the first round of the 2023 NHL Entry Draft, defenseman Oliver Bonksigned an entry-level contract with the Flyers on August 18, 2023. The Flyers are high on the 18-year-old's two-way upside and project him as a potential top-four NHL defenseman as he gains experience and fills out his 6-foot-2 frame.

Bonk's contract is "slide-rule" eligible for the 2023-24 and 2024-25 seasons. That means the Flyers can assign the 18-year-old blueliner back to the Ontario Hockey League's London Knights for the next two seasons without the contract counting against the league-mandated limit of 50 NHL contracts per team. Additionally, the contract will not count against the salary cap if it slides.

It is common practice across the NHL for teams to sign many of their 1st round draftees in quick fashion: often within the first few months of the Draft. This is most typical with top-end prospects drafted out of the CHL (OHL, WHL or QMJHL). It's less common, but also not rare, for a second-round pick to be signed within the first year of his selection in the Entry Draft.

The most common exceptions for rapid signings are with NCAA-bound draftees. That is because these players would lose their collegiate hockey eligibility immediately upon signing a professional contract. Another common case in which there's a delayed signing is with top prospects drafted from European teams, unless the plan is to bring the player to North America right away.

The timelines are driven by the NHL's rules about how long clubs can hang on to draftees' exclusive signing rights. For example, for an 18-year-prospect drafted out of a league in Sweden, Finland, Czechia, Germany or Switzerland -- countries whose national federations have a formal transfer agreement with the NHL -- the NHL team that drafts the player has a four-year signing window before potentially losing the player's rights.

Conversely, with CHL-affiliated prospects such as Bonk, NHL clubs have only two years to sign the player or lose his exclusive rights. In Bonk's case, had he not been signed, the Flyers would have had until June 1, 2025, to get him under contract before he could re-enter the Draft or become a free agent.

Basically, there's not much downside to getting a recent CHL-affiliated draftee signed in rapid fashion. The assumed risk comes in terms of what happens if the prospect does not develop as anticipated: whether it's due to disappointing performance, lack of physical development/conditioning, injury, or a combination of factors.

Let's assume that Bonk plays two more years in the Ontario Hockey and then. come 2025-26, joins either the Flyers in the NHL or the Phantoms in the American Hockey League depending on the pace of his developmental progress. At that point, the first season of his three-year contract would take effect and would count both on the salary cap and toward the 50-contract limit.

The same basic scenario would apply for 2023-24 or 2024-25, except that Bonk would not be allowed to play in the AHL. This is due to the "CHL/AHL Age Rule" stating that players drafted from the CHL must be at least 20 years old to play in the American Hockey League. The teenager could play in the NHL but, if not, he must go back to his junior club. This rule dates back to 1979, when the National Hockey League lowered the Draft-eligible age from 20. From the 1980s onward, a player who is 18 as of Sept. 15 of an NHL Draft year is eligible.

The AHL age rule does NOT apply if a player is drafted from Europe (or even on loan to a CHL team from a European club) in his Draft year. Likewise, a collegiate player who gives up his remaining NCAA eligibility to turn pro as a teenager, is also exempt. The requirement to be 20 years for AHL eligibility only applies to the OHL, QMJHL and WHL, as it would for Bonk.

The length of an entry-level deal is spelled out in the Collective Bargaining Agreement (CBA) between the National Hockey League and the NHL Players' Association. It depends on the player's age at the time he signs his first pro contract. As an 18-year-old, Bonk's deal automatically falls in the three-year term category.

Likewise, the CBA is also explicit in spelling out base-salary and signing bonus maximums. This is done to keep entry-level deals on relative contractual uniformity on an entry-level deal regardless of which team drafts the player. There is, however, a certain amount of negotiational wiggle room in terms of structuring performance bonuses (such as winning the Calder Trophy or hitting specified milestones).

All entry-level deals, by rule, are two-way contracts. That means, the player would earn one salary rate in the NHL but a lower one in the AHL (once age-eligible for that league). Bonk's contract, at the NHL level, will carry a $950,000 cap hit once it takes effect. At the American Hockey League level, he'd earn $82,500. As with all contracts, these are prorated figures based on a full season at the NHL or AHL level. In actual practice, the cap figures are calculated on a daily basis and the player is paid accordingly.

The specific breakdown on Bonk's contract at the NHL level: He will get a full-year base salary of $855,000. There are no performance bonuses in year one but he can earn a maximum of $25,000 in bonuses in his second year and $500,000 his final year. Performance bonuses do not count against the cap during the season but are figured into a team's final expenditures toward the cap at the end of the season.

Lastly, a quick explanation of signing bonuses: A prospect's signing bonus is guaranteed once he signs the deal and the money is paid in installments. The money is his to keep regardless of the other aspects of the contract (including where he's playing in a given season). Although the installment may be paid to the player before he reaches the NHL or AHL and will not count on the salary cap during that time period, it will be folded into the calculations once he's playing professionally.

In Bonk's case, the player receives a $95,000 signing bonus installment up front for putting his name on the dotted line. Subsequent $95,000 installments are paying in the summer of 2024 and summer of 2025.