This is a quick and dirty post, to further explain my various tweets on the subject of Yi Jianliang’s new contract with the Los Angeles Lakers. As it has nothing to do with the Miami Heat, I may ultimately choose to delete it. The figures provided in the post are as publicly reported by Eric Pincus of BasketballInsiders.
The Los Angeles Lakers signed Yi Jianlian to a fascinating contract on Monday, which can pay out anywhere between $250,000 and $8,000,000.
Yi’s contract calls for a base salary of $1,139,123 — the minimum salary for a player with five years of NBA experience — which is guaranteed for just $250,000. The partial guarantee is essentially equivalent to payment from the beginning of the season on October 25th through November 30th. If he continues to be on the roster after November 30th, he will then earn $6,701 in base salary each day thereafter through January 10th, at which point his entire $1,139,123 base salary would become fully guaranteed.
Yi’s contract also calls for three bonus payouts at $2,286,959 each, for playing in at least 20 games, 40 games, and 59 games, respectively. The 20th game can come no sooner than November 30th (at Chicago), the 40th game can come no sooner than January 6th (vs. Miami) and the 59th game can come no sooner than February 24th (at Oklahoma City).
The contract was clearly optimized not only to incentive Yi to perform, but also with potential trade implications in mind if he doesn’t.
Yi will be eligible to be traded as early as December 15th, at which point his contract will have paid out $348,438 in base salary and accrued another $2,286,959 in future bonus money if he will have played in at least 20 of his team’s then 28 games; that’s either $348,438 or $2,635,397 in total.
Yi will be eligible to be traded as late as the February 23rd NBA trade deadline(1), at which point his contract will have accrued his full $1,139,123 base salary, and accrued future bonus money of either $2,286,959 or $4,573,918 if he will have played in at least 20 or 40 of his team’s then 58 games; that’s as little as $348,438, or possibly either $3,426,082 or $5,713,041 in total.
Yi’s trade value is tied not only to how much of the bonus money he will have earned, but also to the classification of it.
There are two categories of performance bonuses: those that are classified as “likely to be achieved” and those that are classified as “unlikely to be achieved.” Only likely bonuses are charged against the salary cap. Yi’s bonuses have been classified as “likely to be achieved” (which is an interesting story in and of itself)(2). As such, his full $8,000,000 maximum potential payout will be charged against the cap for trade purposes, even if ultimately he does not earn some or any of his bonus money.
According to salary-matching trade rules, Yi’s contract can therefore potentially be used by the Lakers, on its own, to bring between $5,266,667 and $12,100,000 in salary in potential trade scenarios. More importantly, a potential trade partner could send out between $5,266,667 and $12,100,000 million in exchange for Yi’s contract on its own. And if that team were to immediately thereafter waive Yi, it would only owe the amount on his contract which has become guaranteed (i.e., excluding any as-yet unearned bonuses). That, in turn, could potentially offer substantial savings.
Below is the amount which will have become guaranteed on Yi’s contract, by day (for each day of the regular season): Read more…