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Nicolas Batum Restricted Free Agency and Its Implications: One More Time

"Mon Dieu!  My head starts hurting every time I try to figure this out."  Photo: Steve Dykes-US PRESSWIRE
"Mon Dieu! My head starts hurting every time I try to figure this out." Photo: Steve Dykes-US PRESSWIRE

The recent statement by Nicolas Batum's agent that he and Batum wouldn't be rejecting good offers to help out the Trail Blazers has rekindled a blaze of questions in my inbox, asking about the intricacies of the Batum situation. We've covered this ground before, but here's the definitive post answering the basic questions people are asking.

Click through for the read.

Why didn't the Blazers just negotiate a new contract with Batum last fall if they wanted him that bad? Then we wouldn't be going through this!

It's a matter of cap space. Heading into the free agency period Nicolas Batum will take up $5.4 million of Portland's salary cap. This is called a "cap hold" and applies to a team's free agents. The $5.4 million hold will remain on the books until Batum's next contract becomes official.

Had the Blazers negotiated with him last year his new salary would have counted against the cap instead of the $5.4 million cap hold. That amount presumably would have been MORE than $5.4 million. The Blazers want to use the different between $5.4 million and Batum's new contract amount to sign more free agents before absorbing that new contract onto the cap.

How much extra cap space did the Blazers create for this free-agency period? Nobody knows for sure. It's to Batum's advantage to test the market, though, getting the highest offer possible. In order to sign him early the Blazers would have been required to make an offer higher than what he thought he could get from any other team this summer. Since numbers like $10 million or more have occasionally been thrown around, that's a pretty good guess at what it would have taken to get him to give up on his free agency. The Blazers didn't want to pay on the high end of the scale to re-sign Batum and lose that potential cap space in the process.

Wait a minute! In past seasons when people talk about signing new players up to the cap limit and then re-signing your own free agents using his Bird Rights everybody says it can't be done! What changed?

Nothing changed really. The cap hold is designed specifically to keep you from pulling that move...counting a player's potential future salary against your cap in anticipation of you re-signing him.

The amount of the hold is based on a players salary the previous year. In past years people have talked about re-signing players whose salaries were already high. Therefore their cap hold was also high. Let's say you've got $15 million in cap space but you've also got two free agents on your team to re-sign, one with a cap hold of $8 million and one with a cap hold of $7 million. Because of those holds, you don't have any cap space left to spend on other free agents.

There is a way to get rid of a cap hold: renounce the player in question. If you cut that player with the $8 million cap hold you now have $8 million to spend under the cap! The hold disappears when he leaves the roster. But by renouncing him you also lose his Bird Rights which allow you to go over the cap when re-signing him. Therefore you can't spend the $8 million in cap space you just generated on another free agent and then go back to sign the player you just renounced, as that would put you over the cap.

Nicolas Batum's situation is skewed by the fact that he's coming off of a cheap rookie-scale contract, therefore his cap hold is comparatively small. This leaves the Blazers plenty of room to sign other guys while maintaining his cap hold on the books. Meanwhile they still hold his Bird Rights, meaning they can go over the cap to re-sign him.

In this particular case, the Blazers will want to use all the space around the hold to gobble up free agents or make trades, get right up to the cap line (minus Batum's $5.4 million cap hold), and then re-sign Nicolas to a full contract using those Bird Rights.

Again, this only works because Batum's cap hold is small compared to the size of Portland's cap space and Batum's eventual contract. That's where the wiggle room comes in. Don't go thinking you're going to do this with LaMarcus Aldridge someday. The lesson that you can't buy up everybody else's free agents then re-sign your own usually holds.

What's up with this 72-hour thing?

A cap hold is only in force until a new contract is signed. Once a player and a team ink a deal, the hold disappears and is replaced by the value of the new contract.

Nicolas Batum is a restricted free agent, meaning the Blazers have the right to match any offer made to him by another team. Once Batum accepts an offer from another team, Portland has 72 hours to decide whether they will match it or let him go.

Let's say Batum gets a $10.4 million offer from San Antonio. Let's also assume the Blazers plan to match it. The clock now starts ticking. Until they officially match only Batum's $5.4 million cap hold applies to their cap. But once they match Batum's new salary of $10.4 million will apply. That means if the Blazers haven't spent that $5 million difference on another free agent, it will (in effect) disappear. Batum counts as $5.4 before the deal, $10.4 after.

Let's show this example in round numbers to make it clear. Assume the cap is $60 million. Assume the Blazers only have $35 million in salary committed under the cap, plus Batum's $5 million cap hold. They have $20 million to spend ($60 mil cap - $35 mil salaries committed - $5 million cap hold = $20 mil).

Now Batum signs that offer sheet worth $10 million. The clock starts. One of two things is going to happen:

  • Ideally the Blazers would spend all available cap space on other free agents, putting them at $60 million in salary including Batum's $5 million cap hold. ($55 million total on all other players including the new free agents, $5 million in cap hold.) When they match Batum's offer his $5 million cap hold becomes $10 million in real salary and now their cap total is $65 million ($55 million total on all other players including the new free agents, $10 million in Batum's new salary.) Ooops! They're $5 million over the $60 million cap! But that's OK. They had Bird Rights on Batum so they're allowed. In this example they spend a full $20 million on new free agents and trades and then re-signed Batum.
  • If the Blazers can't sign other free agents to fill up their cap space in that 72-hour window the situation looks different. Let's say they can't sign anybody. They're still sitting at $40 million after three days, including Batum's cap hold. Once they match Batum's new offer his salary goes on their books. That $5 million hold becomes $10 million in actual salary. Now instead of $40 million they sit at $45 million. Furthermore, since Batum is the only guy they can go over the cap to sign they cannot spend up to $65 million as in the first example but must stick with the $60 million cap limit. In this example they are left with only $15 million to spend on free agents and trades because they had to re-sign Batum before they spent the rest of their available space.

Just remember, Batum's cap footprint is going to increase after his new contract is executed and Batum is the only player the Blazers can go over the cap to sign. That means they want to sign his contract last to push them over the cap at the end of the process instead of signing it first and then bumping up against a cap ceiling that they now can't break.

Isn't this a little esoteric? Does it really matter?

Yes it is, but yes it could.

This is why Batum's agent's statement that he was going to take the "first good deal available" instead of waiting on the Blazers made some waves yesterday. Ideally the Blazers would like to wait as long as possible for that 72-hour clock to start, giving them ample time to sign everybody they want before having to put Batum back on their cap fully. But that timing isn't in their control, it's in Batum's. As soon as he accepts an offer that clock starts whether they're ready or not.

That's why the Blazers are going to have to move fast to convince players to sign with them. If they don't get their business done before Batumerella's clock strikes midnight they lose that extra $5 million.

Is $5 million that much?

It could be. It's the price of a good free agent or a substantial increase in your offer to a great free agent. Also don't forget that being under the cap allows you considerably more trade flexibility. It could allow you to make an unbalanced trade or to serve as a third party for other teams who needed to dump salary and are willing to pay you picks to take on players. It's a lot better to have the $5 million than not.

Theoretically the difference could be less or more than $5 million. It all depends on the offer Batum accepts. The amount of flexibility the Blazers stand to lose is: Cost of new offer against cap - $5.4 million.

Does every offer that Batum gets this summer start the clock?

No. Only one offer is official: the one he accepts. He and his agent can field offers from a dozen teams. Ultimately, though, he picks just one and signs it. He's then committed to that contract. Either the Blazers will pay it (matching the terms as is their right) or his new team will. The moment he accepts a deal the clock starts.

Why would Batum want to sign early? Wouldn't he want to field as many offers as possible?

Waiting until later in the free agency period costs you because teams have already signed other free agents with their cap space. The market for Batum should be pretty clear pretty early on. It makes no sense for him to turn down an offer that's otherwise good in the hopes of pocketing a million or so more later on. More likely he'd lose that million and more.

Shouldn't he have an interest in helping out his team by waiting?

It's not your team until they pay you what you're worth.

Can the Blazers sign-and-trade Batum?

Yes, but there are particulars.

He would need to sign with Portland directly, not sign another team's offer sheet. Portland is allowed to make offers to him like anyone else. If he signs somebody else's sheet, though, no sign-and-trade is coming.

If the Blazers use Batum's Bird Rights to go over the cap limit when re-signing him, he becomes a Base Year Compensation player. That makes him harder to trade in ways we won't get into right now. Suffice it to say you'd need to find other teams with cap space either to trade him to directly or to facilitate as a third party taking on extra players.

Still Confused?

Remember these basics:

1. The Blazers will probably want to spend all the cap space they can on free agents or facilitating trades before using Batum's Bird Rights to re-sign him, going over the cap at the very end. That maximizes the use of their cap space.

2. Once Batum signs an offer sheet from another team the Blazers have 72 hours to get all their business done on that front before the opportunity ends. If they haven't filled up their cap space by then, Batum's new contract will count towards the cap limit instead of allowing the Blazers to go over it.

3. Therefore the Blazers will hope Batum moves slowly in signing an offer sheet. Meanwhile the Blazers will move as quickly as possible to spend that cap space. In other words, it's a race.

--Dave (