Sunday, February 10, 2013

Francisco Liriano's Unique Deal Finally Official

Francisco Liriano has finally signed with the Pirates and his reconstructed contract is certainly unique. While Liriano can still earn the full $12.75M over two years that was agreed before Christmas, he’s now guaranteed just $1M over one year due to the injury to his non-pitching arm. In order to make room for Liriano on the 40-man roster, Vin Mazzaro was outrighted to Triple-A and will be a non-roster invitee to Spring Training. 

The contract is certainly creative and very unique. Liriano can earn up to $3.75M this season due to days not spent on the disabled list due to the fracture to his upper right arm after a fall in his bathroom. Furthermore, the second year has become a club option for $8M or a vesting option at $5M, $6M or $8M depending on days spent on the DL due to the injury, with performance relate bonuses that could allow the pitcher to earn up to $8M if the option vests for less. It's the first contract for a pitcher that has incentives that are all based on an injury to his non-throwing arm - if he spends time on the DL for any other reason (so if he picks up an injury to his left arm) it will not stop the option from vesting.

Liriano’s low guaranteed salary in 2013 leaves the club with an Opening Day payroll at around $63M, which could rise to around $67M when performance related bonuses are added. If the club has a $70M budget for the season, the club could make a further move ahead of the season or will have the space to add salary at the deadline – either way the flexibility is there should an opportunity present itself. 

The deal takes away risk for the club but has plenty of upside. When I looked at the impact that Liriano moving to Pittsburgh could make after he originally agreed to join the club, I considered that the pitcher being worth around two wins above replacement due to the league and home field change was a reasonable projection (six of the home runs that he had surrendered in 2012 would not have left PNC Park) and therefore the contract would have been worth less per win than market value and therefore a win for the club. However, if he can harness his control and keep the ball on the ground, there is upside for more value. 

What certainly seems likely due to the contract being renegotiated is that Liriano will begin the year on the disabled list, meaning that the fifth spot in the rotation to begin the season could well be up for grabs during Spring Training. I believe that Jeff Locke and Kyle McPherson would have to be the favorites,  even with the addition of Jonathan Sanchez, as both players have options remaining and could be sent to Triple-A once Liriano is ready. Depending on how long Liriano will remain on the DL, it could also put pressure on James McDonald; if he continues along the lines of the second half of last season and Locke or McPherson pitch well to begin the year then McDonald could well be pushed to the bullpen. 

It’s almost surprising that the Pirates were able to complete a deal with Francisco Liriano and only guarantee the pitcher $1M. It’s such a low risk for the club that he surely could have received more elsewhere (for example Scott Baker signed a one-year deal with the Cubs for $5.5M even though he should begin the season on the DL while recovering from Tommy John surgery). Nonetheless, even before the injury I considered the contract to be relatively low risk in terms of potential value, so the new deal has the potential to be even more of a win for the club.

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