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Breaking News: Yankees, Severino Avoid Arbitration Hearing with 4/$40M Extension

As first reported by Joel Sherman earlier today, the Yankees and Luis Severino avoided going to an arbitration with, and finalized a multi-year extension with their ace pitcher (pending a physical).

Sherman was also the first to report the base details of the extension, stating the 4-Year and $40 Million figure and had mentioned an option.

Jeff Passan followed up later with the detailed agreement between the Yankees and Luis Severino, filling in the detail that the Yankees included a club option at the end of the deal with a $2.75 Million buyout.

With this news, the Yankees have officially avoided going to any arbitration hearings with all of their 9 players who were arbitration-eligible; previously reaching deals with the other 8 players earlier in the offseason.

 
Hear #Yankees and Luis Severino avoided an arbitration hearing by reaching agreement on a multi-year deal pending a physical — Joel Sherman (@Joelsherman1) February 15, 2019

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Severino gets $40M for 4 yrs guaranteed with an option. #Yankees — Joel Sherman (@Joelsherman1) February 15, 2019

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Breakdown of Luis Severino’s deal, per source: 2019: $4M+$2M bonus 2020: $10M 2021: $10.25M 2022: $11M 2023 (club option): $15M with $2.75M buyout Interesting part of that: higher salaries in ’20 and ’21, lower than usual in ’22. Why? Protection against a work stoppage. — Jeff Passan (@JeffPassan) February 15, 2019

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Details of the Deal:

This extension comes the day after the Philadelphia Phillies signed Aaron Nola to a 4/$45 Million extension. (If you’re interested in an article about it, here is a nice quick read from Forbes), which seems to be the going-rate for buying out a players arbitration years.

Luis Severino was a Super-Two, which means that he would’ve been able to go through 4 years of arbitration, and this deal buys out each of those years to follow. This year, Luis Severino was going to be making either $4.4 Million (Yankees offer) or $5.2 Million (Severino’s Camp Offer), which would’ve projected him, if he continued his production levels, to the following three years of arbitration:

 

2019: Lowest: $4.4 Million; Highest: $5.2 Million -> Instead making $4 Million with a $2 Million Bonus

2020: Projections around $8.5 Million -> Instead making $10 Million

2021: Projections around $15 Million -> Instead making $10.25 Million

2022: Projections around $25 Million -> Instead making $11 Million

2023 (Club Option): (Free Agency) Contracts projected to be around $25 AAV -> Potentially making $15 Million

 

In total, this would’ve been about 4/$53 Million through the next four years of arbitration; and 5/$78 Million given the potential club option to buyout his first year of free agency.

The deal the Yankees and Severino have agreed to has netted the Yankees a theoretical $13 Million over the next four years, and $23 Million over the next five years. (Once again, provided that Luis Severino keeps up a consistent production level over the next four seasons.)

 

Quick Reaction:

I honestly think this deal is the best deal that could’ve happened between the Yankees and Luis Severino.

For the Yankees, this is a sound financial and business decision, because it should theoretically net them over $10 Million in surplus value over the next 4 seasons, which they can then (hopefully) use on getting/keeping other players.

For Severino, it’s no secret that while he has shown ace-potential for extended periods of time, he has had poor seasons and hasn’t been a super consistent pitcher through each full season. What this does, is it guarantees him a nice payday negating how a poor season (or half a season, like last year) wouldn’t destroy him in future years of arbitration.

#Extension #LuisSeverino

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