Jan
30

Reevaluating Johan Santana: part 2 of 2

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This is part 2 of my attempt to reevaluate Johan Santana and his desirability as a trade target for the Yankees this summer. Yesterday we looked at the nature of Santana’s injury, and saw some speculation on when he might be back to full strength. I also noted that his decline in performance from his Minnesota years may obscure the fact that he’s still a very valuable pitcher, provided that he’s healthy. Today we’re going to examine Santana’s contract and try to handicap what a trade might look like.

The dollar bills

When the Mets acquired Santana from Twins in February of 2008, they immediately inked him to a long-term extension which replaced the final year of his contract. His new contract is a 6 year deal worth $137.5 million with a club option of $25M for 2014 ($5M buyout).The contract is backloaded, a present from Omar to Sandy, meaning that the annual salaries increase as the deal progresses. It’s often said that Santana has 4 years and $80 million left on his contract. It’s not so simple.

In 2011, Santana will make $22.5M. In 2012 his salary escalates to $24M and then to $25.5M in the final year of the deal in 2013. As mentioned, the team has a $25M club option ($5M buyout) for 2014. It’s worth noting that this club option transforms into a player option if Santana reaches certain milestones, which you can read about here. To my best understanding, Santana would have to win the Cy Young in 2012 or 2013, or finish second or third in Cy Young voting in both 2012 and 2013, or be on the active roster for the final 30 days of the 2013 season while pitching 215 innings in 2013 or a combined 420 innings between 2012 and 2013. Got that? Suffice it to say, if Santana earns his player option for 2014 it will mean that his 2012 and 2013 seasons were productive and valuable for his club. We will operate on the assumption that he does not earn his option though, since this would represent the more cautious scenario for the acquiring team.

Assuming the option is declined, this means that Santana is due $77M between now and the end of the contract. However, it’s extremely unlikely that Santana is dealt any time soon, meaning that by the time he goes on the trade market in July or August of 2011, roughly half of his 2011 salary should be paid out. The Mets don’t provide a convenient contract amortization schedule for us, so we’ll ballpark it and say that Santana will be due $10M in 2011 by the time he hits the market. This reduces the total contractual obligation of the acquiring team to $67M.

Again though, it’s not so simple. Santana’s contract defers $5M of the payout annually, a true Mets specialty (see: Bonilla, Bobby). Santana receives $5M of his annual salary seven years after the season in which the salary is earned at 1.25% compound interest. Say what you want about Omar Minaya, and you can say plenty, but getting a player to defer roughly a quarter of his annual salary for minimal interest is a nice touch. If we assume that the Mets defer $5M of the contract at the beginning of the year, this would reduce Santana’s 2011 salary to $17.5M, meaning that the total remaining obligation in 2011 by the time he’s dealt would be roughly $8M. In 2012 the total salary obligation would be $19M and $20.5M in 2013. Depending on how you slice it (and it’s unclear whether the team treats the deferred compensation as a future liability with no bearing on current cash flow or amortizes it over the course of the year in which the salary is earned, I’m guessing the former), the acquiring team would be on the hook for roughly $47.5M during the life of the contract and then $5M in both 2019 and 2020. The common refrain that  Santana is due $80M over 4 years is enough to make one blanch. However, when the club option and the deferred compensation are factored in, the total obligation is far more team-friendly.

The trade

It seems clear that the Mets won’t contend in 2011. The Braves and the Marlins have put together decent clubs, the Phillies are an evil four-headed monster, and the Nationals’ acquisition of Tom Gorzelanny essentially ensures them the divisional crown (I kid). The Mets’ focus ought to be on 2012 and beyond. They have a fair amount of money coming off the books after 2011 in Jose Reyes, Carlos Beltran, Oliver Perez and Francisco Rodriguez, but one has to imagine they’ll at least attempt to keep Reyes long-term.

The Mets may be looking to cut payroll now not only in recognition that their contention window is at least 2012, but also because of the team’s rather precarious situation. Yesterday Joel Sherman reported that the Wilpons may be interested in selling a non-controlling stake in the team in order to raise money. As Sherman noted, the obvious implication is that the Madoff scandal has handicapped them in a far more significant manner than they’ve let on. Indeed, part of the reason for seeking a strategic partner is the lawsuit attempting to recover money from the Madoff scheme. There was speculation yesterday that the trustee for the Madoff victims could be seeking as much as one billion dollars from Fred Wilpon. Wilpon’s statement admitted that the team desired to raise cash in response to this:

“To address the air of uncertainty created by this lawsuit, and to provide additional assurance that the New York Mets will continue to have the necessary resources to fully compete and win, we are looking at a number of potential options including the addition of one or more strategic partners”.

As Craig Calcaterra noted, though, it may not be possible for the Wilpons to keep a controlling stake in the team:

Even if these numbers are not accurate, however, the key point is clear: the Wilpons’ current financial situation is going to be directly impacted by how much the government is seeking in its clawback lawsuit. If it’s anything close to figure Hubbuch is reporting, they will have to sell way more than a minority share in the Mets.  Indeed, they’ll likely have to sell the whole team.

Bringing it back to Santana, it may be the case that the Mets could seek to unload his expensive contract in 2011, both as a way of shoring up their annual cash flow and for preparation for 2012 and 2013. If so, the trade of Roy Oswalt from the Astros to the Phillies last summer may serve as a model. Last July the the Phillies sent J.A. Happ and two prospects to the Astros in exchange for Oswalt. Oswalt had $23M left on his contract and the Astros agreed to pick up nearly half of it, $11M. Oswalt did not demand that the Phillies pick up his 2012 option for $16M; instead, if either Oswalt or the Phillies decline his 2012 option, he will receive $2M.

The Mets could consider something similar, picking up some of Santana’s salary and receiving prospects from the acquiring team in return. If the Mets were unable or unwilling to pay Santana’s salary then the cost in prospects would certainly be less. Obviously there are a lot of moving parts, but the primary concern is Santana’s health. If he doesn’t return to full strength then this is all moot. If he does, though, then it wouldn’t be completely surprising to see them try to unload his contract late this summer. Should the Yankees kick the tires and consider Santana again? Would the Mets be willing to do an Oswalt-like deal for him? Just when you thought you were out, just when you thought the Yankees’ saga with Santana was finally over..they pull you back in.

Categories : Pitching
  • Mike

    Looking at Oswalt, it might be more difficult for the Mets to absorb any salary in making a trade….politically, they might be able to say they are clearing salary ( ie Knicks) to build a better future, but if trading Santana they end up only costingnthe acquiring team a fraction of his salary because the Mets are kicking in monies they ” dont have”, itmight be difficult to stomach for their fans -> and for potential new ownership.

    Because of his salary, there are likely only a few teams who can offer players the Mets would need and absorb a salary like his for a #2/3 starter on the downside of his career….so this might be a guy they are stuck with

    • Ted Nelson

      I don’t think this will be a huge problem. They would not be absorbing any salary. They would be clearing salary. Their choices may be pay Johan money they can’t afford to pay him, or trade him for partial salary relief. If part of what they absorb is the deferred part, they really shouldn’t have too much of a problem making it work. Then again, maybe the sell a stake and have no more financial problems at all.

      If they’re really worried or frugal they can try putting him on waivers to see if anyone picks him up and just literally give him away if anyone is willing to pay all that salary. If no one is willing… they’re back to eating some salary in a trade.

  • LET SBGL BACK ON BRACKMAN’S DEBUT

    This is a nice post, changed me from “no way in hell santana is a good idea” to “maybe, just maybe, this could be good.”

    Still, IMO trading for Santana during THIS season would be batshit insane. Only way I entertain thoughts of trading for him is if he pitches successfully and has a good recovery in August and September. Then I think about trading for him for the last 2 years (2012/2013) of his contract with significant money being eaten.

    Bottom line, I don’t think he’s the best option, but he’s not the worst.

    • Nostra-Artist

      Batshit insane from a baseball and ticket sales perspective, yes. But if the Wilpons financial condition is as bad as some think, it could force their hand.

      One thing, don’t believe a word the Wilpons are saying about this. Tyler Kepner said they were denying reports they were looking for partners as recently as thursday, and we all know they claimed the Madoff money was “separate”. We won’t even get into what happened with Beltran and his injury.

      • Accent Shallow

        Yeah, the Wilpons are full of crap. Unfortunately, trading for Santana has little to do with the Wilpons’ credibility. Unless they’re willing to eat the entire deal (which they would not do if they’re trying to save money), why acquire a guy who may be done?

        • Ted Nelson

          The Yankees would probably have a lot better feel for his chances than us (whether the chances are better or worse than we think). Part 1 makes it seem fairly likely he’s not done, but who knows.

          If they really feel he has a good shot at recovering and they can rob the Mets if they do the deal now… **maybe** it makes sense. The article, though, and most fans are talking about trading for him once his rehab is over at the earliest.

  • Ultimate Yankee Warrior (James)

    If he’s healthy, sure why not. The problem is that’s a big if.

  • Mackeyse

    As noted by SBGL before in thread I didn’t expect to be swayed but this was a nice post. still not convinced, but it’s more intriguing than I ever would have allowed it to be.

  • Billion$Bullpen

    Still not going to happen. He may leave the Mets but I doubt there is any shot at him being traded to the Yankees. No old hurt expensive pitchers with personal/ legal problems please.

  • 28 this year

    The problem is, the risk isn’t worth it. The Yankees need help for the first half of the season more so than the last considering how some of the kids could step up. Those kids aren’t ready yet so we need help NOW. Santana is injured so it really isn’t worth the risk. I think the Yankees are better off steering clear of Santana.

  • http://www.canyonofblueshirts.com Canyon of Blueshirts

    Major shoulder surgery, going from a pitchers ball park to a short porch in right, the NL to the AL. Unless the Mets sent a lot of cash the Yanks way, I can’t see it being worth while.

    • Nostra-Artist

      I agree his salary leaves little margin for error, but he’s a good fit for the ballpark. Lefty fly ball pitchers are fine in YS3. But as you said, the Yanks and Mets will never make a deal of this significance, but that doesn’t mean we can’t kick it around.

  • http://twitter.com/steveh_mandaura Steve H

    If the Yankees were willing to take on a lot of salary, I can’t imagine the price would be too high in prospects. Seriously, if he were placed in waivers, how many teams would put a claim in? Right now, when injured, none, but even if healthy, there aren’t many teams that would take on his deal at this point. The more I think about it, the more I’d consider it, though it’s obviously still dependent on his ability to come back from injury.

    • Ted Nelson

      Good point.

      Oswalt was tearing apart the NL when traded and the Astros still got basically nothing while eating half his salary. Happ and 2 19 year olds flirting with .700 OPS’ in the low minors (one of whom they traded for Brett Wallace).

      The Yankees should monitor the situation to see if the Mets are looking to give Santana away, not go out and invest any more heavily than they need to in him.

  • cranky

    If Johan Santana were a good used car, I’d take a chance on him.
    After all, if you buy a good used car, and it doesn’t work out for you for some reason, you can always sell
    it again.
    But that’s not the case with Johan Santana.
    If the Yanks were to trade for him, and he worked out, they’d be thrilled. If the Mets were to eat $15mil of his contract, the Yanks would be more than happy to pay the remainder for a pitcher of Santana’s potential. (I say “potential” because Johan Santana is, at this point in time, nowhere near a “sure thing.”)

    And what if it didn’t work out?
    Santana would be absolutely untradeable, a $60+million albatross worse than any the Yanks have ever taken on before.
    And the prospects they’d have to surrender would add insult to the injury.

    Shoulder injuries can be a bigger problem for pitchers than almost any other kind of malady. Worse than elbows, even. And this current problem isn’t even Santana’s first shoulder injury.

    P.S. I think the Yanks already have “Johan Santana.” A much younger, healthy version. Throws 92-93 from the left side and has a killer change-up. His name is Manny Banuelos and he may be the top LH prospect in the game. I’d vote for waiting on Manny than trading for Johan.

    • Ted Nelson

      “Santana would be absolutely untradeable, a $60+million albatross worse than any the Yanks have ever taken on before.”

      He’d only be signed for 2 seasons, which substantially lowers the risk. AJ Burnett, for example, could be argued to have been a worse risk and bigger albatross.

      “P.S. I think the Yanks already have “Johan Santana.” A much younger, healthy version.”

      *If* Banuelos spends 2011 in AA at 20 and 2012 in AAA at 21, then he *might* be ready for the big leagues in 2013 at 22. So you’d only have one year of overlap. Then there’s the building innings angle. He’s pitched over 65 innings in a season once in the minors. It’s a lot to assume he’s going to be ready for 200 major league innings by 2013, let alone 2011 or 2012.

      You can’t just assume any one prospect is going to rocket right on through the minors and become a perennial Cy Young candidate in the majors at 21, 22. Imagine if the Yankees didn’t bring in guys ahead of them because of their high hopes for the likes of Alex Graman, Brandon Claussen, Eric Duncan, Drew Henson, etc. The Yankees have to consider their pitching prospects and have the flexibility to insert them should they be ready, absolutely, but they can’t bank on them. They can’t base their entire Santana decision on a 19 year old in AA.

      Oswalt wasn’t nearly as risky or as expensive as Santana, and the Astros still ate a good chunk of money AND took back almost nothing in return: a mediocre MLB starter and 2 19 year olds struggling to OPS .700 in the low minors. If that’s the case the Yanks need to consider Santana. If the Mets aren’t giving him away, then they probably shouldn’t invest much in him.

  • Bojo

    I would expect that his command and control will still be iffy when he returns IF the surgery is like TJ surgery. Thus, I would expect his performance in 2nd half to be poor, and creating a real buying opportunity if his arm is strong and healthy (different than having control and command–which comes back with time).

    IF his arm is healthy, I would actually LOVE to see him picked up with one caveat. The Mets would have to eat the remaining salary for 2011. Going forward, his salary can be absorbed by the slary budget dedicated to Andy Pettitte and Jorge Posada…so his future salary is not a worry.

    The way I would love to work the deal is the Yankees take Santana and Beltran and the Mets pick up their 2011 salaries. Beltran replaces Jones in 2nd half when he usually suffers a dip in performance. At season’s end, the Yankees get a pick if they offer Beltran arbitration and he refuses…or they just let him go.

    In return for picking up some salary, I’d be willing to give the Mets the type of picks Phillies gave up.

    The net result–a strong bench addition with Beltran for 2011, and a solid #2 starter in Santana for 2012 and 2013.

  • Ted Nelson

    Good analysis of all the ins-and-outs. Definitely complicated, and probably worth keeping an eye on.

    The timing of it is interesting… The earlier you theoretically make a trade for him the more risk you assume, but the price may be lowered proportionately to that risk. Mid-season the Yankees will have an idea of what their rotation/team looks like, who else is available at what cost, and if Santana is rehabbing on schedule. Maybe they don’t need him, or maybe it’s worth taking a few months of a mediocre, rehabbing starter to shore up the back-end of the rotation for 2011 and potentially have a front-end starter through 2012 and 2013. Then again, if he’s struggling when he gets back in 2011 as part 1 suggests he might, his price probably doesn’t go up too much next offseason. That could be an ideal time. But maybe the Mets don’t need salary relief anymore by then… If you wait till he’s back to his old stuff, you eliminate a lot of risk but aren’t likely to get much of a deal on him if he’s available at all, unless the Mets situation doesn’t get resolved.

    The deferred salary could make it easier for the Mets to assume part of Johan’s salary, with a good portion of what they assume being the deferred portion of his salary.