Calculating Ian Kennedy’s Negative Trade Value

At 49-51, 8 1/2 games out of first place, the Royals sound like they realize they’re probably not contenders this year, and with a few days to go before the trade deadline, they’re now listening to offers for their best trade chips. Given the price of relievers these days, Wade Davis is pretty clearly their most valuable asset, and the Royals could expect to get back a significant haul for him, given that he’s also under contract for 2017.

But according to Jeff Passan, the team might be looking to use Davis to do something besides add young talent to the organization.

Sources: Royals trying to package Ian Kennedy in a potential Wade Davis deal. Dodgers a strong match. Covet Davis and can take on Kennedy $.

— Jeff Passan (@JeffPassan) July 28, 2016

So that’s an interesting idea. By tying Kennedy to Davis, the price in talent would come down, which would likely make a deal more appealing to a team like LA — we’ve seen the Dodgers take on plenty of dead-money deals in order to acquire or retain prospects in previous trades — and would give the Royals the flexibility to reallocate Kennedy’s money to other free agents this winter, which would allow them to essentially make a trade for 2017 assets instead of prospects who might not be able to help before the rest of their core players hit free agency.

On the surface, the idea makes some sense, but it also brings up a question; how much negative value does Kennedy have at this point? How much of a discount on the talent portion of the trade would the Royals have to give in order to free themselves from the rest of Kennedy’s deal? Let’s do the math.

Over the winter, the Royals signed Kennedy to a five year, $70 million contract that was as shocking as it was ill-advised. And, unfortunately for Kennedy’s trade value, they backloaded the contract, as they have done with almost of their free agent contracts the last few years, so barely any of that guaranteed money has been paid as of yet.

Kennedy’s 2016 salary is just $7.5 million, so since we’re about 60% of the way through the season, he’d been paid $4.5 million of that, and is due about $3 million over the rest of the season. The salary jumps to $13.5 million next year, then $16 million in 2018, and $16.5 million in each of the final two years of the deal. That means that any team trading for Kennedy at this point would be taking on about $66 million of the $70 million the Royals paid him, and because of the backloaded nature of the deal, Kennedy’s opt-out is basically irrelevant; he’s not walking away from the final $50 million of the deal after next season.

So it’s $66 million for 4.5 years of control of a 31-year-old with a pretty gnarly home run problem, and one who has been pretty terrible for the last few months. Since getting off to a hot start, Kennedy has imploded recently; since May 12th, he’s made 14 starts, putting up a 5.54 ERA/6.17 FIP/4.54 xFIP. Pitchers like Kennedy — ones who live at the top of the strike zone — have been particularly crushed by the surge in home run rate, and since Kennedy is one of the most extreme flyball starters in the game, the current dinger-fest environment essentially wipes out all the value he gets from controlling the strike zone.

His current combination of skills make him nothing more than an innings sponge, a guy you can pencil in as your fifth starter during the regular season if you don’t have better options but not someone you want to put on the mound in the postseason. But that’s clearly not worth $66 million, especially since Kennedy is probably headed towards the end of his career.

If we take the current projections for Kennedy’s future value and run them through our contract estimating tool, Kennedy’s future value looks something like this.

During 2017-2020, when Kennedy’s contract calls for him to be paid $62.5 million, he’s projected to be worth $26.6 million, a $36 million deficit relative to his contract. That’s a pretty big liability.

Of course, that’s not the whole story of Kennedy’s value, since that ignores the rest of 2016; at just $3 million and as an arm who provides depth, at least, he does have a little bit of value in a market where teams are starved for guys who can throw the ball. Even with his current struggles, Kennedy has some value above and beyond his minimal remaining 2016 salary. Let’s be generous and say he’s got $6 million in positive value remaining for 2016, mostly due to the current market for available arms; that puts his overall value at about $30 million in dead money over the remainder of his contract.

To put that in prospect terms, $30 million is roughly equivalent to the value teams are paying to acquire middle-of-the-top-100 types. The Royals top prospect, Raul Mondesi, happens to have been ranked #55 on the recent mid-season Baseball America Top 100, so you could think of Kennedy as having roughly as much negative value as Mondesi has positive value. If the Royals were tying Kennedy and Mondesi together, instead of Kennedy and Davis, we’d expect that teams would consider taking the pair if they didn’t have to give up anything in return, assuming teams value Mondesi at the same level he’s being ranked on public prospect lists.

So if you package Kennedy with Davis, that’s the kind of player you’re taking out of the return. Given what Ken Giles, Craig Kimbrel, and Aroldis Chapman brought back in trades recently, the Royals are certainly justified in believing that Davis is worth a lot more than just one mid-top-100 prospect, so they’d almost certainly still be demanding some real talent back as well as forcing the Dodgers (or other interested buyers) to relieve them of Kennedy’s contract, but with a $30 million anchor attached, the talent return would certainly be less than each of those three commanded.

If the Royals are willing to concede that Kennedy’s roughly a $30 million liability, and agree to remove one of the primary trade chips from the deal in order to clear his contract from their books, then a deal could make sense for both sides.

But there’s also a catch that I’d think makes this idea unlikely to work with LA specifically; the luxury tax. As a team over that’s been well over the luxury tax threshold for years now, the Dodgers now pay a 50% tax on all big league salaries over the threshold, so when you factor in the money they’d have to pay to the league, Kennedy would actually cost them $99 million over the next four years, not $66 million, assuming they stayed over the luxury tax threshold for each of those seasons.

Even with the Dodgers financial resources, it’s almost impossible to imagine them valuing Davis highly enough to agree to take on $100 million in payments that would come with accepting Kennedy’s contract onto their books. And since the Royals aren’t going to be factoring in the luxury tax payments in how much they’ll save, there will be a mismatch of value between what the Royals are dumping and the Dodgers would be acquiring. With those luxury tax payments factored in, I don’t see how the two teams bridge the gap, getting to a point where both sides felt like this was a deal worth making.

Tying Kennedy to Davis is an interesting idea, but if the Royals are set on doing that, they’re probably better off trading the pair to a team that won’t have to pay a tax for taking on the money. Davis is a valuable trade chip, but he’s not worth paying $100 million for the right to watch Ian Kennedy decline even further.