Lakers’ Luol Deng buyout is even more brilliant than you think.
Be afraid of the Los Angeles Lakers. Not only do they have Magic Johnson and LeBron James. But this front office is legit. Witness the Luol Deng buyout.
As foreshadowed by the prescient Mark Deeks earlier this week, the Lakers indeed reached a buyout agreement with the veteran Deng that went into effect on September 1. They used the stretch provision to do it, shrinking the salary cap burden of the contract on an annual basis by extending the pain over a longer time period.
That’s important, because it helps the Lakers in their quest to add another superstar free agent next summer. By buying out Deng with the stretch provision, the Lakers immediately enter the race for Kawhi Leonard or DeMarcus Cousins with no further moves necessary.
But it gets even better.
Pulling off this buyout with the stretch provision after August 31 allowed the Lakers to keep the cap hit for Deng’s 2018-19 salary full while stretching only salary due to him in 2019-20. That shrinks the dead cap on the Lakers’ books going forward substantially.
The stretch provision allows you to waive the player and for salary cap purposes only charge the amount owed in equal installments over a term equal to twice plus one the years left on the deal. The Lakers owed Deng $36.8 million over two years thanks to the largesse of the team’s previous front office. Had the Lakers waived and used the stretch provision on August 31, L.A. would be carrying $7.36 million in dead cap space for five years, a huge burden.
However, shrinking the Deng’s cap hit for 2019-20 would give the Lakers $35.8 million in cap space in the critical summer of 2019: enough for a max contract for a player with less than 10 years of service, like Leonard, Cousins, Jimmy Butler, Klay Thompson, or Kemba Walker.
By waiting until September 1, Deng’s 2018-19 salary became fully committed, meaning the Lakers could only stretch his 2019-20 salary. This is fine, because there’s no reason for the Lakers to clear 2018-19 cap space now: all the players you’d use it on are signed! The other reason a team might use it — to minimize luxury tax payments — are irrelevant to the Lakers. By waiting, the Lakers would instead count $18 million of Deng’s contract against the 2018-19 sheet and carrying $6.27 million in dead cap space for three years.
That’d get the Lakers’ 2019 cap space to $36.9 million — a little bit more cushion for signing a player with less than 10 years of service to a max contract. Those players are projected to sign for $32.7 million in starting salary next summer.
But what about players with 10 or more years of service, like, say, Kevin Durant? Their projected max starting salary next year is $38.2 million. So stretching Deng over three years wouldn’t quite do the trick. There would need to be another move to make the space.
Unless the Lakers convinced Deng to take a discount to get out of his contract.
Which they did.
By waiting until September 1, Deng’s 2018-19 salary became fully committed, meaning the Lakers could only stretch his 2019-20 salary. This is fine, because there’s no reason for the Lakers to clear 2018-19 cap space now: all the players you’d use it on are signed! The other reason a team might use it — to minimize luxury tax payments — are irrelevant to the Lakers. By waiting, the Lakers would instead count $18 million of Deng’s contract against the 2018-19 sheet and carrying $6.27 million in dead cap space for three years.
That’d get the Lakers’ 2019 cap space to $36.9 million — a little bit more cushion for signing a player with less than 10 years of service to a max contract. Those players are projected to sign for $32.7 million in starting salary next summer.
But what about players with 10 or more years of service, like, say, Kevin Durant? Their projected max starting salary next year is $38.2 million. So stretching Deng over three years wouldn’t quite do the trick. There would need to be another move to make the space.
Unless the Lakers convinced Deng to take a discount to get out of his contract.
Which they did.
Deng agreed to give up $7.5 million off the $36.8 million owed to him. It’s not cap trickery: it’s real salary that Deng will relinquish just to free himself from the contract and join another team.
That buyout discount — which is steeper than normal, as players aren’t usually willing to give up substantially amounts contractually owed to them for obvious reasons — is split over the two years even though Deng’s full salary will count against the cap this season. So the Lakers’ irrelevant Deng cap hit for 2018-19 becomes $14.3 million, and the amount to be stretched over the subsequent three years becomes $15 million, which becomes an annual dead cap weight of $5 million per year.
Remember, Durant’s 2019-20 starting max salary is $38.2 million.
The timing of the stretch provision down to the day, plus the buyout discount Deng agreed to down to the dollar, give the Lakers projected 2019-20 cap space of ... $38.2 million.
Is Durant remotely interested in joining LeBron on the Lakers? No one knows. But on the chance that he is, the Lakers are ready to give him every dollar he deserves ... just like they were prepared to do for LeBron this summer. Preparation is the mother of success.
The Lakers’ front office drew guffaws when it followed up the LeBron coup by signing Lance Stephenson, Michael Beasley, and JaVale McGee. No one should be laughing anymore. The Lakers are worth fearing again.