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Atlanta's options with Walter Tavares and Lamar Patterson

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The Atlanta Hawks have an intriguing prospect overseas in Walter Tavares. Here is what it will cost to bring him over.

The Hawks hold the rights to two players overseas from the 2014 NBA Draft, Lamar Patterson and Edy Tavares. In the 2015 NBA Draft, Atlanta also picked up the rights to Marcus Eriksson and Dimitrios Agravanis to add to the rights to overseas players that Atlanta has. These include Sergey Gladyr (drafted in 2009), Giorgos Printezis (part of the Thabo sign-and-trade), Alain Digbeu (drafted in 1997), and Augusto Binelli (drafted in 1986). But the main focus here is on Lamar and Edy as they have a much higher likelihood to be on the Hawks roster within the next few years. Let's discuss how the Hawks can bring these players over to the NBA eventually.

A Buyout?

Edy Tavares reportedly signed a three-year contract last June with Gran Canaria before the 2014 NBA Draft. Apparently, that contract has language for a $600,000 buy-out clause that the Hawks and Edy can negotiate with Gran Caneria. This is according to his agent, Andy Miller, and was in reference to the 2014--15 Season. This amount likely decreases throughout the life of the 3-year contract and we should conclude that Edy's buyout is less than $600,000 for the 2015--16 NBA Season. But admittedly, this is only an educated guess.

As for Lamar Patterson, he signed a one-year contract in Turkey last year. We can ignore any buyout talk for him because he is not currently under contract with an International Basketball Team.

Buyouts are a financial settlement between a team (Gran Canaria) and a player (Tavares) to release the player from their contract to a third-party (Atlanta Hawks) which may also be involved in the financial transaction. A buyout can be a one-time payment or multiple payments over time, it depends on the negotiation process. The CBA affords each NBA team an uncapped amount for the buyout of an International Player. The amount is not a set amount per team, rather it is a set amount per player. For the 2015--16 Season, each International Player can have up to $625,000 applied towards their buyout that does not count towards the cap. This is not necessarily the most amount of money that an NBA team can pay for a buyout though. That depends on what available options the Hawks have to sign Edy.

Under the unlikely scenario that Atlanta needs to pay more than $625,000 for a buyout of Edy's contract, then any amount applied towards a buyout needs to be in the form of a signing bonus. Signing bonuses are slightly strange because they are paid out immediately upfront, but their value applied towards the Salary Cap is spread equally across the number of guaranteed years in a contract. A signing bonus cannot be for more than 15% of the total guaranteed value of a contract which limits the amount that can be used towards a buyout.

Because it is unlikely that the Hawks would need to provide a larger buyout than the $625,000, I will be terse with my examples. The first example is a two-year veteran minimum contract for Edy. This would carry a maximum of $209,959 that can be applied towards a buyout and look as follows:

Season CBA Minimum (and Cap Hit) Buyout Amount Actual Payment to Edy
2015--16 $525,093 $209,959 $420,113
2016--17 $874,636 --- $769,656
Total: $1,399,729 $209,959 $1,189,770

(the Excluded International Player Payment Amount can also be applied)

If you notice, the Cap Hit is equal to one half of the Signing Bonus plus the Actual Payment to Edy for each year. So the minimum amount of money that Edy could be paid over 2 years is a little less than $1.2 million. Bummer?

UPDATE: The first example is irrelevant, the minimum player exception does not allow for bonuses of any kind. This was highly unlikely in the first place, but an oversight on my part.

The second example suppose that Edy demands a higher salary than what the minimum player exception allows and the Hawks are over the Salary Cap. If that is the case, then the Hawks would only have the Room Mid-Level Exception available. For this scenario, here is the table:

Season Room Mid-Level Exception with 4.5% Raises Buyout Amount Actual Payment to Edy
2015--16 $2,814,000 $860,290 $2,383,855
2016--17 $2,921,273 --- $2,491,128
Total: $5,735,273 $860,290 $4,874,983

This option would allow the Hawks to contribute $863,195 $860,290 towards a buyout (for a total of $1,488,195 $1,485,290 including the International Player Payment). I will tell you in two sections why this is a bad idea to sign Edy via the RMLE, but this effectively covers the bases for any reasonable amount that may be required in buying out the contract for Edy.

Wait, is that a loophole1 in the CBA I see?

Hold up a second. Let's actually look at the relevant sections of the CBA that relate to the "Excluded International Player Payment Amounts" to make sure we really understand what is going on. This would be in Article VII-3-(e):

(1) Any amount in excess of the amounts set forth below ("Excluded International Player Payment Amounts") paid or to be paid by or at the direction of any NBA Team to (i) any basketball team other than an NBA Team, or (ii) any other entity, organization, representative or person, for the purpose of inducing a player who is participating in the game of basketball as a professional outside of the United States to enter into a Player Contract or in connection with securing the right to enter into a Player Contract with such a player shall be deemed Salary (in the form of a signing bonus) to the player:

Oooooohhh.

Focus on the bolded portion. Re-read it.

Now read it again.

So it appears that the "Excluded International Player Payment Amounts" does not necessarily have to go to the owner of an International Player's contract (Gran Canaria). This amount can also be applied to any other person. Edy Tavares is a person. Modus Ponens tells us that since Edy is a person, he can receive some portion of an Excluded International Player Payment Amount if it induces Edy Tavares to sign in the NBA.

W-O-W!

Explosion

So, the Hawks can take the full $625,000 of Edy's Excluded International Player Payment Amount for the 2015--16 Season and use this to further entice Edy Tavares to come over. A hypothetical amount of say $300,000 to Gran Canaria, $300,000 to Edy, and $25,000 to me (my finder's fee) could be negotiated. So this illustrates that the Hawks have more of an edge in signing Edy than what would appear to be. Wonderful.

Am I reading this right, can this be applied to Lamar Patterson as well?

Yeah dude, it can. This can actually serve as a signing bonus to A-N-Y player where signing them would fall under the qualification of "inducing a player who is participating in the game of basketball as a professional outside of the United States to enter into a Player Contract." So this could happen with respect to Lamar Patterson because he played professional basketball in Turkey last year.

It can also happen with Dario ŠarićJosh ChildressBoban Marjanović, or Andrew Goudelock! This is an amount that does not count against the Cap. It is essentially a signing bonus, although it can be paid at once or across multiple installments.

But remember Bud and Wes, I have a finder's fee. This goes for any other NBA executive or player agent as well.

Potential Future Issues?

Whenever an NBA team signs a player, they should be concerned about the Rights that the team will own at the end of the player's contract. For players with no NBA experience, this is crucial because of Restricted Free Agency.

Players that enter the NBA without a Rookie Scale Contract (i.e. someone who is not a first round draft pick) can be a Restricted Free Agent if their contract ends after one, two, or three seasons. For free agents that are non-first round draft picks with 3 or fewer years of experience, they are subject to Restricted Free Agency if their previous team extends a Qualifying Offer. Restricted Free Agency is preferable for teams because one of its effects is to lower the contract amount of said free agent. This is because opposing teams need to have Cap Space to sign a Restricted Free Agent to an offer sheet. And once that offer sheet is tendered, the opposing team needs to wait up to 3 days to see if the original team matches said offer sheet. This ties up the opposing teams Cap Space and limits their potential free agent moves.

The Atlanta Hawks would like the most favorable contract in acquiring a player. What does said contract look like? Well, it is actually the kind of contract that Mike Muscala agreed to.

Relating this to Muscala

Mike agreed to a contract for 4 Seasons at the Minimum Player Salary for all. The guaranteed amounts for said contract were 50% in the first season (2013--14), 50% for the second season, 0% for the third, and 0% for the fourth. So the Hawks could waive Muscala and not be responsible for any salary after his second season (which is the present). Further, Mike Muscala has a Team Option for the 4th year of his contract. This matters greatly because the Hawks would be able to decide if they want Mike Muscala to be a Restricted Free Agent (decline the Team Option) or an Unrestricted Free Agent (pick up Team Option). This structure is similar to what the Houston Rockets signed Chandler Parsons to and why they had such a difficult decision in picking up his Option Year last off-season.2

Teams are conscientious of the Rights they have over players. If a player plays only one season for a team, he has Non-Bird Rights. If it is two seasons, then the team has Early Bird Rights.3 If a player has played for three or more seasons, then the team can exceed the Salary Cap in order to sign a player to his maximum salary (his Bird Rights). In essence, a third season gives the Hawks ability to re-sign said player under any circumstance. This is ideal.

Here's the rub for Edy and Lamar though, the Hawks need Cap Space in order to give a third season. Both the Minimum Player and Room Mid-Level Exceptions are limited to 2 years in length. This is partly why you may hear that the Hawks can only sign either through cap space:

Ah. So it is not that the Hawks are unable to do so but rather they really want that third year in a contract.

Is there anything more?

Yes. The Hawks will want Edy or Lamar to have a salary at the minimum. This is because of Cap Holds.

If you read where Larry Coon's CBA FAQ discusses Cap Holds, you may be led to believe that a Free Agent's Cap Hold is directly related to the Rights (Non-Bird, Early Bird, or Bird) that a team holds. This is true for every single situation except for one:

When a player's previous salary was for the minimum player salary.

In the event that a player was previously paid the minimum player salary, their Cap Hold is for the two-year4 veteran minimum salary regardless of what rights a team holds over said player. This goes right back to Muscala's contract and why it is the most team friendly contract ever. Mike Muscala will have Bird Rights at the end of this Season. This means that the Hawks can exceed the Salary Cap by any amount up to Mike Muscala's maximum contract value. But his Cap Hold? It would be $980,431, which is $436,960 over the Incomplete Roster Charge. If Mike was paid $1 more than the minimum, then his Cap Hold would be for $1,799,827. So almost twice the amount. However, this amount is likely mitigated because if the Hawks plan to make Mike Muscala a Restricted Free Agent, then his Qualifying Offer becomes his Cap Hold.

That was a fairly savvy move from the Hawks. This also drives home why the Hawks will want to sign 2nd round draft talent to a minimum contract value. It is a smart business move and deviating from this strategy would prove to be an unnecessary risk.

So if the Hawks do bring Edy or Lamar over this year, expect it to be with Cap Space and at the minimum salary. It makes sense.

Edit (6-30-2015): Corrected for misinterpretation of cap hold on restricted minimum salaried free agents.

Edit (7-10-2015): Corrected the Room MLE buyout example for an oversight in how signing bonuses are calculated. Also, the minimum salary example is irrelevant and impossible so I have struck it out.


1. Also, calling this a loophole is a little disingenuous. We don't actually know what the intent of this section of the CBA was when written in 2011. Maybe the wording of an "Excluded International Player Payment Amount" was always meant to include said player of interest. I was not present at these negotiations, so I cannot comment on intent and thus loophole may not be the right term here.

2. In the 2014 NBA off-season, Houston could have picked up Chandler's Team Option, but then Chandler would be an Unrestricted Free Agent the next off-season. Houston decided to decline the Team Option, thus making Chandler Parsons a Restricted Free Agent and could have matched any offer (provided they tendered the Qualifying Offer). It turns out they did not match the contract offer and they were hampered in Cap Space because Chandler Parsons did not have a minimum salaried contract.

3. For both one and two years of experience, a Restricted Free Agent is subject to the Gilbert Arenas Provision that limits their starting salary in offer sheets to no more than the Non-Taxpayer Mid-Level Exception (but then may balloon in the 3rd season to a very high amount).

4. If the player only has one year of experience, then the Cap Hold is actually for the one-year veteran minimum.