Expiring Contract/Poison Pill

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  • #671
    alcsd
    alcsd
    Moderator

    Expiring contracts:

    A player’s services that is about to lapse. For example when a player making $7M a year comes to the end of his contract, that amount comes off his team’s cap number. That can drop the team below the league’s “soft cap” payroll ($58.679M for 2013-2014 season), giving it flexibility to acquire other players in trade or free agency.

    It can lessen or eliminates a team’s luxury-tax obligation by moving it below or closer to the tax threshold ($71.748M-”hard cap”).  And if it exceeds by $4M, that team is not permitted to acquire a player via sign-and-tradem** (1), or to use the full-mid-level (MLE) or bi-annual exceptions (BAE).

    As soon as a team completes a sign-and-trade deal, or uses its BAE **(2), or uses more than $3.1827M of its MLE** (3) to sign a player, that team becomes hard-capped at $75.748M for the 2013-2014 season. In other words, team salary can’t exceed that amount at any point before June 30th, 2014.

    (1) For example, the Lakers were in the hard cap” payroll (and still is) were able to sign Howard to a 4year/$80M (but chose not to due to the luxury tax consequence if they were to take such an action ) and trade with the Rockets, however,  the reversed is NOT allowed.  For example, if Howard were on the Rockets and the Lakers wanted to acquire him,  then they (the Lakers) were not able to do a sign and trade (with the Rockets) for Howard because it meant that the Lakers were acquiring a player.

    If Howard wanted to stay with the Lakers, then he would have gotten a 5 year/$119M because they were the only team that own his bird rights.

    (2) The current MLE allows teams that have no cap space to spend a maximum of $5.2M for four years as long as the team did not pay the luxury tax in the previous season.  If the team is over the cap and did pay the luxury tax the previous season, the mid-level exception is only $3.2M for 3 years.  If the team has cap space, they may spend $2.7M for 2 years.

    (3) Bi-Annual Exception can only be used by non-taxpayers aka below the “apron” (i.e., not paying luxury tax, or less than $4 million above the tax line). It cannot be used if the team has already used the Taxpayer Mid-Level Exception or the Room Mid-Level exception. Exception cannot be used in 2 consecutive years and has maximum contract length of 2 years.  It may be split and given to more than one player, and can be used to sign players for up to two years.  The amount is set at $2.016M with an raises of 4.5% max.

    Sources:

    http://nba.si.com/2013/07/09/nba-salary-cap-luxury-tax-figures-2013-14/

    http://en.wikipedia.org/wiki/NBA_salary_cap

    http://www.cbafaq.com/salarycap.htm

    http://www.libertyballers.com/2013/7/2/4485996/sign-and-trades-under-the-new-cba-and-how-they-affect-andrew-bynum

    Editing mode: content will change

    #672
    alcsd
    alcsd
    Moderator

    Usually teams that are in the re-building  mode will trade for expiring contracts because it will come off their book so they can start a clean slate at the end of the year.

    An expiring contract is easier to move, but it doesn’t mean that it can be traded.  It just means that it’s easier than it was before to trade that player.

     

    #1137
    alcsd
    alcsd
    Moderator

    Options must be exercised or declined by October 31st for the next season. 76ers just waived him without even considering his next year’s team option.

     

    #1139
    alcsd
    alcsd
    Moderator

     

    “Typically, however, the phrase “poison pill” is used to refer to a component of the Gilbert Arenas provision, which is also explained in our glossary. The Arenas provision arises when a player who has been in the league for one or two years hits restricted free agency. Because the player’s current team only holds his Non-Bird or Early Bird rights, the club would typically be unable to match a big offer sheet. However, the Arenas rule limits the amount a rival suitor can offer in the first two seasons of a deal, allowing the player’s current team to match an offer using the full mid-level exception or the Early Bird exception.

    The catch? While a rival team’s offer can’t exceed the MLE amount for the first two years, a huge salary bump is permitted for the third year, as long as that rival team can fit the average annual salary of the whole offer into its cap space. This is what we saw last summer from the Rockets, when Houston took advantage of the Arenas provision to sign Jeremy Lin and Omer Asik to three-year offer sheets that the Knicks and Bulls decided not to match. Both offers included a maximum raise in year three, which was referred to as the “poison pill.”

    http://www.hoopsrumors.com/2013/07/the-poison-pill-misconception.html

    In this case, Morey gave the Knicks and Bulls the “poison pill” making it difficult for them to match due to luxury tax penalty in the 3rd year.  Meaning “poison pill” only referred to the Knicks and Bulls should they match; and not to any future teams if they were to trade for Lin and/or Asik (because the salary cap at $8.3m/$8.3m for the next two years).

    Lets say, Knicks fans petitioned and demanded the Knicks to bring Lin back to NY, and someone possessed Dolan’s mind and he demanded that Lin is to come back home, then the Knicks cap hit at $8.3m/$8.3m for the remaining two years. But the salary for Lin is still $5m/$15m.  Here is an excerpt from the article below:

    “From now until the date the contracts expire, Lin and Asik will have cap numbers of $8,374,646 in each season, along with being paid $5.225 million this season and $14,898,938 next. This is true no matter which team they are on – even if Asik is traded back to Chicago (or Lin is traded back to NY), $8,374,646 will remain the cap number. While owners looking to trade for them must be mindful of the latter, it is the former figure which is used for all cap calculations, and thus trade permutations. So when you see their cap hit listed as $8,374,646, this is the one that matters. This is the figure around which outgoing salary in trade, cap room, proximity to luxury tax, and all that jazz, is calculated from. This, then, is the correct figure.”

    http://www.shamsports.com/2013/07/omer-asik-and-jeremy-lins-contract.html

     

    #1140
    alcsd
    alcsd
    Moderator

    It’s a known fact that most teams’ primary concern is the cap hit unless the owners are cheap.  In Lin’s unique case, they will make back with Chinese sponsors money or at least help to pay for Lin’s salary. And any team traded for him will get the same benefits of Lin’s unique case.

    The Rockets are making least a few million dollars off of Lin for each year that he stays as a Rockets, that money generated will  help to pay for his salary and for any team that will trade for him.

    The average salary for a starting PG is around $8m and his stats (13.3 Points/3Rb/6.1Ast/1.6 Stl) fall for in line with those who are making $8m. Isn’t because he didn’t put up Linsanity numbers?  If he did, then Morey did get him at a yard sale. What is Lin supposed to up in terms of stats…? 17/8..? 18/9….?  Those close to elite and elite numbers (CP3).

     

     

    #1142
    alcsd
    alcsd
    Moderator

    “The Orlando Magic are open to trading Jameer Nelson and his reasonable $8.6 million contract. However, for 2014-2015, he is scheduled to earn $8M. 

    Nelson is owed only $2 million in guaranteed money next season.

    The Magic would almost certainly deal Nelson for a future first round pick, but could find that asking price difficult.”

    “Nelson is in the second season of a three-year contract that is guaranteed for only $2 million in 2014-15. That low amount, combined with his playoff experience and his skill on offense, should make him a popular player for other teams as the NBA trade deadline approaches on Feb. 20.”

    Nelson is used as an example because the Magic wants to move him and his contract and stats are similar to Lin. If the next team wants to keep him, then they will pay him $8m on his last year, however, if he is waived by July 15, then they will only have to pay him $2m. However, they will save $6m in salary cap because only $2m is counted toward the cap.

    There isn’t any  starting PG that is on the trading block that I can compare Lin to, his contract is not toxic at all.

    http://basketball.realgm.com/wiretap/230542/Magic-Prepared-To-Trade-Jameer-Nelson-For-First-Rounder

    http://espn.go.com/nba/player/stats/_/id/2439/jameer-nelson

    http://www.magicbasketballonline.com/magic-salaries/

    http://www.cbssports.com/nba/eye-on-basketball/23955664/jameer-nelson-accepts-he-may-get-traded

    #1143
    etane
    etane
    Moderator

    I am doing research on how chinese money flow into NBA to supplement what you got above to make a blog post out of it.

    #1145
    alcsd
    alcsd
    Moderator

    Thanks.

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