MLS Offseason Crash Course 4: Loan Signings

Episode IV.

In the first post we outlined a general salary budget optimal strategies framework which was basically that it is good to maximize the portion of a team’s wage bill that is not specifically paid for by the club’s owners (non-DP money). In the second post we talked about how acquiring allocation money achieves this objective (good) and trading allocation money away for MLS players is the opposite of this (bad). In the third post, we talked about how signing young designated players instead of older ones has cap hit benefits as well as ROI/economic benefits. In this week’s post we’ll keep the general concept flowing into other areas of the roster rules. Specifically, if we maintain our goal of increasing the squad’s wage bill relative to the competition without incurring additional costs, there’s another easy tool to aid us: loaned players.

General Benefits of Loans

It is customary in global football for clubs to loan young players to one another for half seasons or seasons at a time. In MLS, acquiring players on loan is helpful for a few reasons. The first is that often, loaned players do not require a significant one-time fee be paid (to contrast with the transfer fee that accompanies most permanent signings). Avoiding large one-time acquisition costs is paramount in MLS, as these sorts of charges often raise a player’s total costs to the level of TAM or DP even at relatively low amounts. The second is that it is not uncommon for a parent club to pay a portion of the loanee’s wages. Having a player on your roster in MLS but not having to pay 100% of that player’s wages is immense as it allows you to once again strengthen the total wage bill of your club (and it’s overall roster strength) relative to the rest of the league without actually sacrificing real assets or even league ones (GAM/TAM/Cap Room). Secondly, loan agreements often have purchase options and options are always valuable from a financial perspective. Specifically in MLS, the ability to not bring a player back in the following season if he’s not working out in the current season allows you to free up the cap space needed in the following season to find the player’s replacement. In MLS with strict salary cap rules, a bad player on an expensive multi-year contract that you can’t get rid of can cripple your team’s overall budget strategy in a way that doesn’t exist in other league’s around the world. In the Premier League for instance, a bad player contract may just be a drain on the overall operating performance of a club, but in MLS, while the unique cap limitations mean the league as a whole bears the financial impact, the player’s specific club is directly and certainly harmed by a bad permanent contract from a competitive standpoint. All things equal, it makes the club’s squad strength worse than their competition. Loaning a few players alleviates some of this club-specific risk.

Atlanta United and Loaned Players

In 2017, Atlanta United acquired 4 players on loan: Josef Martinez, Yamil Asad, Greg Garza, and Anton Walkes. Martinez was a DP whose option was exercised after just 3 games because it turns out he’s Thierry Henry but good. Asad and Garza were paid $150K each by Atlanta, suggesting t many of us that their home clubs footed the bill for the rest. And Anton Walkes was a league minimum $53K charge for Atlanta, suggesting Tottenham paid some portion in addition to this. Atlanta was able to allocate these additional funds to strengthen the squad in other ways. It’s hard to know how much was saved here but it’s not crazy to think it could’ve been as high as $400K - $500K in cap room in savings. But more importantly, nothing is ever a sure thing. While it’s always possible that 4 out of 4 loaned players will be successful, it’s also possible all 4 of these guys could’ve been failures, and if the latter were to have been true and had the deals not been set up as loans, ATL could’ve been heading into 2018 with no roster flexibility. As it turned out, the roaring success of all 4 players in 2017 has left Atlanta with much better problems to have (like how to find a way to exercise options on both Asad and Garza). But it is sensible to create a roster that has the potential to annually and as needed open up 3-4 senior player spots and the related cap room required to sign new targets and bring homegrowns through the system.

2018 ATLUTD Roster Construction Implications

As of early December 2017, heading into the 2018 season Atlanta United does not have any players set up as loan-in deals. Things are also uncertain about the returns of fan favorites Jeff Larentowicz and Yamil Asad. To me, these things seem connected. Based on the 2017 roster composition, we should expect to see between 2-4 loaned players on the 2018 ATLUTD roster. While I cannot imagine the front office finding a suitable Jeff Larentowicz replacement at a comparable price ($175K - $225K) within the current MLS player pool, I could certainly imagine a more expensive player from South America loaned in with his parent club paying a portion of his wages, such that the net budget impact to Atlanta United is comparable to what Larentowicz is demanding for 2018. The same thing applies to Yamil Asad. He was on a $150K budget charge last year (presumably because Velez paid a portion of his wages). For Atlanta to sign Asad to a permanent deal for the 2018 season, not only would it likely require a transfer fee, but his full wages are probably much higher. Could Atlanta find a comparable wide forward / attacking midfielder to loan in for the 2018 season (no transfer fee + potentially subsidized wages)? I would bet yes. Let’s keep an eye on this one to see what the front office does with loaned players once the January window opens.

Appendix: Summary of 2017 MLS Loans

By my count, there were 33 players loaned into MLS this year for an average of 1.5 per team. Siri, insert an excel chart with stacked bars & a line graph on the secondary axis:

Notable is that Atlanta United made the most use of loaned players in 2017, both in terms of number of players loaned in (4 with the next closes teams employing 3), but also in utilization of said players. Atlanta got upwards of 8,000 minutes out of its loanees with much larger dropoffs in minutes for the other heavier-loan focused teams. Remember, Josef Martinez is counted as a loanee in these figures because he began the season that way. Here is loanee minutes vs guaranteed compensation:

You can draw your own conclusion from this one I suppose. Vancouver’s outlier is the rare designated player loanee of Fredy Monterro.

Next week, I think we’re scheduled to look at Allocation Order Rankings, but if something comes up, or you want to do something else. Let me know. We can #pivot.

Email me at TiotalFootball@gmail.com or tweet at @tiotalfootball. There’s a summary of the overall Front Office Manual over at ATLUTDinsight.wordpress.com but I’ll touch on all of that and more over here as the MLS offseason rolls on.