Yesterday we looked at the Toronto Raptors’ post-draft cap situation entering this off-season, as well as some scenarios in which Kyle Lowry re-signs with the Raptors (Plan A). There’s an obvious flip-side in play here, one that is hard to contemplate but also realistic.
Brace yourselves, here come the more pessimistic outcomes. What happens if Lowry leaves the Raptors? First up, the sign-and-trade options (and again we offer the Plan A refresher here).
When the Raptors turned down trades for Lowry at the deadline, part of it was likely that the offers just weren’t that good (so they wouldn’t really regret missing out on them). But part of it was also that there was a chance they would be able to negotiate a sign-and-trade to send Lowry to his team of choice in the summer.
Well, here we are. Teams are clearing cap space left and right for Lowry (the Mavericks and Pelicans both have paths to over $30 million in room), but that still leaves other teams who would be interested in him without cap room.
If a team wants to sign a free agent and doesn’t have the cap room to do so, they have to use an exception. They are called exceptions because they are literally just exceptions to the rule that you have to stay under the cap. The NBA is called a soft cap league because there are so many exceptions that very few teams actually stay under the cap and many teams go way over it, to the point that the NBA instituted the aforementioned luxury tax to try to rein in overspending.
Some of these exceptions are standalone things that can be used to sign a free agent — the various versions of the Mid-Level Exception, for example. But any function that allows a team to do anything and end up adding salary over the cap is technically an exception.
For example, the traded player exception. This exception also takes a bunch of forms, but essentially it says that if a team finishes a trade over the cap, that trade has to meet certain requirements. The key one being that they have to match the salary they send out with the salary they take in within a certain margin. The rule is complicated enough that the margin changes depending on the size of the trade, but for the purpose of the Lowry discussion, since his salary will be so high, the rule is quite simple: a team can only take back at most 125 percent (plus $100,000) of the salary they send out in the trade. There is no minimum amount of salary that needs to come back — but both teams need to be allowed to make the trade (so usually the salary is fairly closely matched).
A key factor in off-season trades is the existence of the sign-and-trade. A team with a player’s rights can sign and instantly trade that player to another team, so long as the player agrees. The player is essentially signing with the other team through the traded player exception — with his previous team is helping out.
Now, since that previous team is helping out, they usually expect something in return. This is where Plan B is for the Raptors. If Lowry decides to sign with another team, but that team cannot (or would prefer not to) use cap room to sign him outright, the Raptors have quite a bit of leverage to extract some value for performing a sign-and-trade to get Lowry where he wants to go. They are the only team with Lowry’s rights, so they are the only team that can sign-and-trade him anywhere.
Now, doing a sign-and-trade to send Lowry somewhere very, very likely means taking back significant salary in the trade, which means the Raptors will lose all that potential cap room if they pursue this route. So you can see why they would ask for something significant in return.
Some Potential Lowry Destinations
So, let’s take a look at a few of the likely destinations for Lowry.
Teams like Dallas, New Orleans, and Miami have the ability to clear varying amounts of cap room, depending on how many of their own free agents they want to be able to keep (or leverage for value via a sign-and-trade), while Philadephia has seemed an obvious match since the trade deadline (and were foolish not to make the trade then, it will be much more difficult and likely more costly now).
Dallas just made a trade to remove Richardson’s $11 million in salary from their books, leaving them with at most about $34 million in cap room. That’s plenty to sign Lowry straight up. But to clear that room, they lose some stuff. First, they lose Willie Cauley-Stein and his $4.1 million salary by declining his team option. They would need to decide that before talking to Lowry. But let’s say they keep that, which would lose them about $3.2 million in room, bringing them to about $31 million, still enough for Lowry. They also have a big cap hit free agent of their own in Tim Hardaway Jr. ($28.5 million cap hold).
If they want to keep Hardaway Jr., they would need to acquire Lowry via sign-and-trade, or shed even more salary to fit both their salaries into cap room. I’m not sure what THJ would cost, but let’s say it would be $20 million per year. That means they need nearly $50 million in cap room. Going this route means shedding Dwight Powell and Maxi Kleber, and they likely can’t afford to lose that much frontcourt depth, especially as they would lose the full MLE to try to replace them. They may be able to move those players for value, but more likely if a team is using cap space to absorb those contracts and allowing the Mavs to maximize their own, they will ask for additional assets.
So if they are going to be spending assets and losing rotation players, they might as well do so in a sign-and-trade transaction. This allows them to stay above the cap entirely, and use the full MLE after the transaction is completed. Here is an example of what that could look like, using one of their free agents they wouldn’t otherwise bring back to help them add salary.
Mavericks Trade: Dwight Powell ($11.1 M), JJ Redick (sign-and-trade $15.6 M), 2025 1st round pick
Raptors Trade: Kyle Lowry (sign-and-trade $30 M)
Redick is probably done, but he can get another payday by agreeing to be salary ballast here. A sign-and-trade contract technically has to be three seasons in length, but here the second and third seasons would be unguaranteed, so the Raptors would only be taking back essentially an expiring contract. Redick’s salary here is just under a 20 percent raise, as any player getting more than that in a sign-and-trade becomes difficult to use for salary matching (due to a rule called base-year compensation, BYC, where their previous year’s salary is likely used for the trade math instead).
Powell provides the Raptors with a quality centre locked in near the MLE for the next two seasons. And the Mavericks throw in a future first round pick (probably protected) down the road after their already traded 2023 pick is transferred for the Raptors’ trouble.
In return, the Mavericks get to not worry about keeping Willie Cauley-Stein, keep Kleber, can re-sign THJ to whatever his market dictates, and have the MLE (however much of the full they can fit) to spend to further bolster the roster.
This deal would add $26.7 million to the Raptors’ roster, leaving them with that wiggle room needed to re-sign Khem Birch (if they want to with Powell there) and Gary Trent Jr.
New Orleans Pelicans
New Orleans is in a similar position as the Mavs. They could clear up to $36 million in salary cap space, but that is assuming they allow Lonzo Ball and Josh Hart to walk in free agency. Keeping only Hart would drop that to $25 million, only Lonzo to about $20 million. Neither amount is quite enough to fetch Lowry. And if there are teams like Dallas offering $30 million, a team with less evidence they can win games and be a contender will likely need to outbid even that value. Let’s peg that potential contract at three years, $100 million — instead of the $90 million total.
We could go through the same exercise, but New Orleans actually has every reason to try to use a sign-and-trade to acquire Lowry. Not only do they have the same reasons to do so (keeping the MLE, keeping Hart at least and either keeping or maybe finding some value in a sign-and-trade with Lonzo), they also will have a really easy time orchestrating the trade itself. Remember the trade they made to clear that cap room to chase Lowry? It hasn’t technically happened yet.
So the idea would be, instead of doing that trade and then trying to make a Lowry trade work, you just make it one big trade.
Remember, the salary matching rules are that a team can take in 125 percent of what they send out. Well, in the Pelicans’ previous trade, they sent out Steven Adams ($17.1 M) and Eric Bledsoe ($18.1 M) and took back Jonas Valanciunas ($14 M). So they sent out $35.2 million, which would allow them to absorb up to $44.1 million — but they only took in $14 million. Huh, that leaves… $30.1 million in remaining allowed incoming salary. That’s convenient.
Now, the Pelicans do still need to convince the Raptors to do the sign-and-trade. But with the Raptors not needing to take back any salary, the price would be much lower than for other scenarios here. There would still be a price, no one helps out other teams for free, but the Raptors could do a sign-and-trade like this and then turn around and still have cap space to use, which is quite a nice scenario to be in.
I won’t bother writing out a detailed trade here, but a simple one could be a straight swap of Lowry for Nickeil Alexander-Walker, who makes $3 million and wouldn’t impact the Raptors’ cap space much. Or perhaps if the Raptors target Lonzo Ball in free agency, the Pelicans could sign-and-trade him to the Raptors, allowing them to keep their full MLE and Trent Jr.’s rights and their minimum salary depth so they can add their free agency target without worrying about cap space. Lots of options here, including draft picks as added value — the Pelicans have plenty of those.
The biggest wrinkle here is likely that New Orleans is not Lowry’s preferred destination, which makes a sign-and-trade more difficult from the jump.
Miami looked to be in a similar situation as the above teams up until yesterday. But then they rather surprisingly picked up Goran Dragic’s team option, leaving them with functionally no cap room to actually make an offer to Lowry. They seem content to rely on Lowry wanting to come there (Lowry and Jimmy Butler are reported to be friends), and the Raptors being willing to make that happen. This gives them much less leverage than other teams.
There still remains the possibility that if they need to create that cap space, they shed an asset to trade Dragic to a team with cap room. In that case, Miami is a little worse off for leverage, they can’t quite get to where they need to be to make a full $30 million offer, though they can get very close by letting all their free agents walk.
They won’t want to do that; Duncan Robinson in particular was a guy they valued highly as a floor spacer and will do what they can to bring back. Losing him and Kendrick Nunn to add Lowry would still be an upgrade, but why take the depth hit if you don’t have to? They’d lose something to the Raptors in a sign-and-trade, but I suspect they value Robinson more than the younger assets if they are making a win-now move like adding Lowry.
Miami can get to only $84.3 million in salary, which amounts to $28.1 million in cap room, by trading Dragic into another team’s cap space (not taking any salary back), turning down the team options for Andre Iguodala (whose option they’ve already declined) and Omer Yurtseven, and letting Robinson, Nunn and Gabe Vincent walk. That could be barely enough, or close enough, for the offer Lowry supposedly is asking for. However, that leaves them with no depth at all, essentially fielding a team of Lowry, Butler, Bam Adebayo, Tyler Herro, and two young players who played 12 minutes a game each in Precious Achiuwa and KZ Okpala (their 10th and 13th men last season). Plus whatever they can do to fill out the roster with minimum salaries.
So, what if instead, they angled to stay above the cap and keep more of their depth, and their rights to their free agents to either keep them or similarly sign-and-trade them for a piece they need. Picking up Dragic’s option points in this direction already.
A deal for Lowry could look something like this — it is similar to the Dallas idea.
Heat Trade: Andre Iguodala (sign-and-trade $18 M), Precious Achiuwa ($2.7 M), KZ Okpala ($1.8 M)
Raptors Trade: Kyle Lowry (sign-and-trade $28.1 M)
That construct gets Lowry exactly the same contract Miami could clear cap room for, but also allows Miami to keep Dragic, Nunn, and Robinson and use the full MLE to add to their roster.
In the case laid out, Toronto takes back $22.5 million, leaving them the flexibility under the tax to re-sign Birch and Trent Jr.
Alternatively, perhaps they are keeping Dragic not to keep on the team, but with the intent to use him as the centrepiece of the above trade, as he is on an expiring contract now (expiring after the upcoming season, that is). This is very likely the case. A trade like that could look like this.
Heat trade: Goran Dragic ($19.4 M), Precious Achiuwa ($2.7 M), KZ Okpala ($1.8 M)
Raptors trade: Kyle Lowry (sign-and-trade $30 M)
That construct gets Lowry a more lucrative deal, with the Heat able to go to the full three years and $90 million or even higher. And it doesn’t require trying to convince a player to sign a contract to go the other way. Miami also keeps Iguodala’s Bird Rights if they want to re-sign him or use him in a sign-and-trade elsewhere. In this case, Toronto takes back a little more ($23.9 million) but still leaves room enough for Trent Jr. and Birch.
I suspect in either of the above cases, the Raptors might ask for an additional 1st round pick (Miami has their 2025 pick to trade), since Miami would likely lose an asset like that to clear cap room for Lowry by shedding Dragic, and they would also lose Robinson and the MLE. The Heat need to provide enough value for it to make sense for the Raptors to walk away from their cap space. Though it would be interesting if the teams managed to find a taker for Dragic’s salary (possibly at the cost of that pick or one of the prospects) so that the Raptors could essentially accomplish the same thing they do in the New Orleans example above — receive an asset or two for Lowry, and still get to use cap space this summer to add a key complementary piece to the core via free agency.
This is the deal that maybe should have happened back at the deadline. Now things are so much harder — the Sixers continue to be in a tough spot moving forward.
We haven’t talked about it much with the other teams, because although it applies to them too, they’re in a position to have cap space, so they have more wiggle room to start with. When a team acquires a player via sign-and-trade (specifically the team that acquires the player who is signed-and-traded, this doesn’t apply to the team doing the signing-and-trading), they are hard-capped for that season. The hard cap is set about $6 million above the tax line, so a team can spend into the tax but not very much. It can severely limit how a team adds to its roster, especially for a contender, which any team trading for Lowry is trying to be.
With a team like Philadelphia, who are starting the off-season far above the cap with no real hope of generating cap room, the hard cap is a far greater concern.
Let’s try two scenarios here. First, we’ll assume Philadelphia has found some other trade for Ben Simmons and is bringing back another All-Star-type player on a similar contract — we’ll call it the CJ McCollum scenario. We’ll assume no salary change there and just leave Simmons’ salary in place as a placeholder for whoever comes in for him (though I have my doubts they will find takers).
How would the Raptors and 76ers construct a sign-and-trade then?
Well, the 76ers are starting with a team salary of $120.8 million, assuming they cut their unguaranteed contracts. That’s for eight players, plus their first round pick this year. The hard cap would be set at roughly $143 million.
If Lowry’s salary is going to be $28.1 million (the same slightly-sub-$90 mil offer the Heat were going to make), that means to match salary, the 76ers would need to send out $22.4 million.
If we assume the 76ers core is not part of this deal, that means the 76ers just don’t have the contracts. Similar to Dallas and Miami, they would need to sign-and-trade one of their own free agents to Toronto. The candidate here would be Danny Green, who is still solid, but not likely to command the sort of salary that would be offered in a sign-and-trade to help this deal happen. Green could make up to $18.4 million without activating BYC. That leaves the 76ers to add in at least $4 million more in salary. So something like this would fit:
76ers trade: Danny Green (sign-and-trade $18.4 M), Matisse Thybulle ($2.8 M), Isaiah Joe ($1.5 M)
Raptors trade: Kyle Lowry (sign-and-trade $28.1 M)
As a note, this could also work by guaranteeing Hill and trading him and Seth Curry, and trying to keep Danny Green. This might be necessary if Green is not open to the sign-and-trade, but I suspect they would prefer to keep Curry.
But wait. The 76ers are only actually removing $4.3 million in salary from their roster, and are adding $28.1 million. That means increasing their salary by $23.8 million, even before accounting for needing to sign players to replace the guys they lost and fill out the roster. Up above we said the 76ers were starting at $120.8 million. Add that $23.8 million and that takes us to $144.6 million — or $1.6 million above the hard cap.
The hard cap is called that for a reason. Teams can’t ever be above it. Period.
So how much more salary does Philly need to shed? Well, this scenario has the 76ers with nine players to start, so they’d need to add at least five players. The trade itself lost them two more, so seven more players. For tax purposes, those seven players, assuming they are all minimum salaries, would count as $11.7 million. The 76ers do have two second rounders they can sign who would only count as rookie minimums even against the tax and hard cap (saving them $0.7 million each), so we’ll take that into account, making that total only $10.3 million.
That puts them more like $11.9 million over the hard cap. Way off. Oops.
How do we fix that for the Sixers? We need to find $11.9 million of salary to remove from the roster, plus enough more to account for each replacement of those removed players making $1.7 million against the tax and hard cap.
So, first stop, Seth Curry. That’s $8.2 million. And replaced by $1.5 million. So that’s $6.7 million of our $11.9. Just another $5.2 million to go.
If we replace Isaiah Joe in the deal, we don’t need to replace the roster spot, so putting Tyrese Maxey ($2.8 million) in for him saves them another $1.1 million.
Meanwhile, sending Shake Milton in the deal ($1.8 million) saves another $0.3 million.
So now the deal is Curry, Thybulle, Maxey, and Milton for Lowry. Leaving aside the trade math for now, the Sixers would still be $3.8 million short of fitting under the hard cap. And there is no way to make it up on the 76ers side unless they are moving a core piece. The only thing that could happen is Lowry accepts a lesser deal. So, instead of the already-low $28.1 million starting salary, he would need to accept a $24.3 million starting salary, good for only $77 million over three years. We note here, due to Lowry’s age, adding a fourth year is not an option, due to the over-38 rule, which is very complicated, but simply put: it practically prevents teams from giving fourth or fifth years to most free agents if the player would be over 38 years old in those seasons.
So this idea depends on Lowry taking a pay cut, and even then the Sixers can barely fit his salary, and they’d have to lose a lot of their team depth and replace it with minimum salaries. It’s just not very realistic.
It’s time to move onto the more obvious solution.
Philadelphia 76ers: Part 2
Ben Simmons is getting traded. The 76ers are asking the world, and getting laughed at. They should (and likely do) want Kyle Lowry. If Lowry wants to play there, there is one easy solution.
76ers Trade: Ben Simmons ($33 M)
Raptors Trade: Kyle Lowry (sign-and-trade $30 M), some package of future first round picks
When nothing else works, try the obvious. Or, you know, try it first. The pick package that would accompany Lowry to Philly would be a matter of some negotiation, and would likely land somewhere near something like a 2022 unprotected first, 2023 swap rights, and a 2024 protected first. The Raptors could include a guy like Chris Boucher if Philly wanted some shooting and rim protection on a sub-MLE deal. And Philly would have some flexibility to add via their own MLE before hitting the hard cap.
I am sure this is less return than Philly would want in a Simmons trade, but they got through the draft with nary a taker, so they might have to choose between an only OK return (though this one is still good for their short term chances to win while Joel Embiid is in his prime) and a very awkward and possibly unacceptable outcome of just bringing Simmons back in the fall.
You’ll note I didn’t include teams like the LA Clippers or Los Angeles Lakers in these sections. That’s because those teams are hopelessly close to (or far above) the hard cap already, such that if they were to try and get involved in a Lowry sign-and-trade there would be no reasonable way to stay below it. Even with a sizeable salary cut for Lowry.
Finally, after all that complicated cap math, what happens if Lowry does just walk from Toronto? Well, that’s where that stuff from yesterday comes in.
We went over the various scenarios, but the Raptors have a cap room range of something like $21 to $27 million.
Some interesting names on the market include (in my personal order of preference):
- John Collins (RFA)
- Lonzo Ball (RFA)
- Jarrett Allen (RFA)
- Richaun Holmes (UFA)
And many more, of course. How much each of those guys would go for is unknown, but with the restricted free agents you generally have to overpay to convince their teams not to match. I expect the full $21 million cap room would be needed for the first three, with Collins possibly needing more. Now, if Lowry walks and heads to New Orleans, that means Lonzo will become an unrestricted free agent and Toronto can negotiate a fairer price without needing to worry about being matched. Still, I’m not certain he ends up much cheaper than that anyway.
Holmes probably takes most of that $21 million as well, if a few million less, so as to functionally use it all. Though it is always good to have a little cap space or exception left over to be able to offer second round picks and undrafted free agents three years (the minimum salary exception only allows for contracts of one or two years).
Personally, I am of the opinion that cap room, when you can manage to have some, is best spent all in one place. You can add MLE-sized contracts after your team is capped out, but adding more than one of those with your cap room is a poor use of resources. Find a talent worth the $20 million you have, and try to add that player. Depth can be dealt with later.
The good news is there is a version of the MLE that is given to teams that use cap space, called the Room MLE. It allows a team to sign a player to up to a two-year contract, and a salary starting at $4.9 million ($10 million total over the two years). Hopefully, that would be enough to re-sign Birch even after using cap room. Birch would then finish that contract with the Raptors holding his full Bird Rights, as he would have been with the team for the previous three seasons, and they would be able to offer him a larger subsequent contract, if both sides were interested in that.
This is a modest note to end on, but as we learned in the past two summers, when stars or beloved players leave Toronto, you’ve got to find the silver linings where you can.
In any case, that wraps it up for these pieces. Now we wait for the 6 pm bell and the start of the usual league-wide frenzy. Hit me up with any questions down below, and I’ll do my best to address them.
All salary information per basketballinsiders.com