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How it Works: A Lucas Nogueira Buyout

What would a buyout look like and how would it work under the CBA and the Hawks cap space?


Lucas Nogueira being brought over/bought out of his overseas contract has been much discussed. Here is how it would work in the context of the NBA CBA.

According to the still-indispensable Larry Coon CBAFAQ, this is how buyouts are done and how they don't circumvent the CBA:

First, there is such a thing called the Excluded International Player Payment Amount (EIPPA), which is the amount is not charged to the team salary. Any amount above the Excluded International Player Payment Amount comes out of the player's salary, and therefore is included in the team's team salary.

For the 2013-14 season, this amount is $575,000.

So the Hawks would be able to pay that much towards a buyout but what if, as in the case of Bebe, the buyout is more than that number (1 million for Nogueira)?

Here's Larry:

It is a common misconception that a buyout cannot exceed the excluded amount. On the contrary, buyouts can exceed the excluded amount, but any amount above the excluded amount essentially comes out of the player's paycheck.

For example, if a team's second round pick in 2011 has a $1 million buyout, the team can use its (Non-Taxpayer or Taxpayer) Mid-Level exception to sign the player, with $1 million going to the player's international team or organization. Since $525,000 is excluded in 2011-12, $475,000 of the player's (after tax) salary will be used to fund the buyout, with the remainder going to the player. The amount above the excluded amount is charged to the team's team salary as a signing bonus (see question number 73).

So now we see how that report that said that the Hawks were splitting the buyout with Lucas came about. Even if the team pays for it, it comes out of the player's salary, ergo, splitting it.

Now, with first round picks, it's different because the salary is slotted. A list of slotted salaries is found, again by Larry Coon, right here.

Nogueira's first year scale salary would be $1,419,200. The Hawks would have to have the part of the buyout not covered by the EIPPA (divided by three as the amount is treated as a bonus in the CBA) and at least 80% of the salary slot fit under the cap. CBA rules stipulate that teams can offer between 80-120% of the cap slot to their picks.

Does it work for Bebe? Let's check the math.

If Bebe's buyout is 1 million, as it's rumored to be, then the Hawks can pay up to 575K of that without concern for cap/slot.

MATH ALERT (Danger all ye who venture forth from this point):

1 million - 575K = 425K

425K is the amount to be covered by Bebe's salary and still have the remainder that's left fit into the cap slot. The CBA takes that excess money and treats it like a signing bonus, which would spread it out over the guaranteed years of the deal, in this case being three years.

Since the 425K would get spread over three years, the amount the Hawks would have to fit into the slot for a bonus would only be 425/3 = ~142K.

The extremes of the salary slot are as follows:

80% of $1,419,200 = $1,135,360

120% of $1,419,200 = $1,703,040

The Hawks could offer a minimum of 90% of the cap slot and make it work (~$1,277,360). The maximum they could offer would be ~110% (~$1,561,120)

The total buyout could be as much as $1,703,040 and the Hawks could still make it work with the 120% of slot.

$1,703,040 - $1,135,360 = $567,680 * 3 years = $1,703,040

Whether he'll come or not, we'll see. Perhaps it will depend on Greg Oden's selection on Friday.

If Oden chooses ATL, you can bet Bebe will not be coming. But if Oden doesn't, we could be seeing the above scenario come into play and Bebe on the Hawks roster this season.

GROUP QUESTION: HAPPY CBA DAY! Any questions on this, please feel free to fire away in the Comments area.