A contract buyout in the NBA is a fairly common thing. It usually happens after the trade deadline when a player has a little bit of money left on their deal, and both sides agree to reduce the amount owed in exchange for a chance to be a free agent. There have been situations where players have agreed to buyouts earlier, and there have been some situations where a team desperately wanted to trade a player and found there to be no trade market for that player and simply waived him and ate the entire balance of the contract.
The Detroit Pistons are still carrying a $5.33 million cap hit on Josh Smith who they waived back in December of 2014.
On draft night, the Chicago Bull abruptly changed course and traded away All-Star Jimmy Butler, embarking on what looks to be a lengthy rebuild. It was a decision that almost everyone around the team saw the need for the Bulls to do. However, it was directly contrary to what the Bulls had implied to both Butler and Wade in their exit interview meetings just a few weeks ago.
Both players thought the team was going to hold the line and bring back the core of last year’s squad, so much so that Butler and Wade both left the country on vacations. Wade saw no reason to wait and filed his opt-in paperwork before heading abroad, despite having until today to file the paperwork.
With the Bulls suddenly going in a very different direction, there has been talk that the Bulls and Wade would explore a buyout. Although the Bulls have said publicly that they would like to have Wade around as a veteran leader, the prevailing thought from Wade’s side is that he does not want to waste any more of his playing career on a rebuild and that he is exploring his options.
Wade’s option year was worth $23.8 million, a number he was unlikely to get from any other team, so opting in was likely the best financial move, regardless of the direction of the team. However, the question now is how much will Wade give back to be free and is that anything the Bulls really want to do?
The terms of an NBA contract are always negotiable if both sides agree to the terms, especially when it comes to what’s owed to a player. Teams will carry the actual payments on their books and the salary cap, so any reduction in money owed is helpful to the Bulls, especially in free agency.
After the Butler trade, the Bulls have just $56.97 million in salary commitments, which includes the $23.8 million owed to Wade. Any reduction in that will reduce the guarantee going into July, so there is motivation to reach a quick deal if the Bulls want to make a clean break.
Speaking of clean breaks, the New York Knicks and Carmelo Anthony have been mentioned as possible buyout partners, as well. Unlike Wade, Anthony is owed not only $26.343 million for the 2017-18 season; he holds a $27.928 million option for the 2018-19 season.
While the Knicks could opt to simply waive and stretch Anthony’s remaining deal, under the NBA’s “stretch provision,” the Knicks would see his money spread out over twice the remaining years plus one. In theory that would be a $10.85 million cap charge for the next five seasons.
There would be some options here if both sides really want a quick divorce. The Knicks could agree to eat the entire 2017-18 season now, and stretch the remaining $27.928m over three seasons, which would reduce the cap charge to $9.309 million for three seasons starting in 2018-19. That would not help the Knicks this summer, but it would trim some of the debt going forward.
The best scenario for the Knicks is if Anthony agrees to some reduction in what he’s owed to be free early enough in the free agent cycle to land a new hefty deal.
NBA contracts do contain a concept called “off-set” which limits a player’s ability to be fully paid by two teams, or “double-dip.” In the case of Anthony, any new deal he signs would reduce what the Knicks ultimately pay him. The way that works is the old team gets to reduce the debt owed by calculating 50 percent of any amount paid over the NBA minimum, which is why most player sign for the minimum after a buyout.
In Anthony’s case, he could make up any amount he leaves on the table with the Knicks in a new free agent deal, if he is set free early enough in the cycle. This is where the Knicks gain a little bit of leverage. If Anthony wants the freedom to choose and possibly sign a longer-term deal, working with the Knicks now makes that possible.
While buying out both veterans seem like the easy route, both teams could still explore trading one or both, especially to a team with cap space.
In Anthony’s case, he still holds a “No-Trade” clause in his contract and can void any deal the Knicks try to make, so moving him remains problematic. The Knicks can always eat his contract and waive him, but if a trade isn’t plausible, a buyout might be the only recourse for what’s become a troublesome and toxic pairing.
Of the two, Wade is the most likely to reach a reasonable deal in a buyout, the Knicks may not be so lucky with Anthony.
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