How it Works: The Eurostash

The practice of drafting an international players and then stashing them overseas (the “Eurostash”) is common, but the logistics of it from a team and salary cap perspective are not often discussed. This post explains how Eurostashing works, the rules behind it, and the salary cap consequences of this practice.

If an international player is drafted in the first round of the NBA draft but is currently under contract with another professional, non-NBA team (or expects to be under such contract), he is eligible for a guaranteed rookie scale contract. Like most first round picks, a cap hold for the applicable rookie scale amount will be applied to their drafting team’s salary as a placeholder for their (almost) inevitable signing. For most first round picks, these cap holds remain until they sign their contract, at which point the cap hold is replaced by the player’s salary. But for Eurostash players who will not sign a contract in the current offseason, the rookie scale cap holds are applied differently. The cap holds for Eurostash players are applied to team salary immediately upon their selection in the NBA Draft, however, under Article VII, Section 4(e)(2) of the Collective Bargaining Agreement (the “CBA”), such cap hold will be excluded from team salary on later of (i) the date the player signs a professional, non-NBA contract or (ii) the start of the NBA season.

For example, in 2011 when the Bulls drafted Nikola Mirotic, he was under contract with Real Madrid. The Bulls were immediately given a cap hold for Mirotic’s rookie scale amount after the draft. And since he was already under contract, his cap hold lasted until the first day of the 2011-2012 regular season. Had he not been under contract but planned to play in Europe and signed a non-NBA contract on December 1, 2011 the cap hold would have lasted from the date of the NBA Draft until that date. This cycle of adding the first round pick cap hold to the drafting team’s team salary will continue every year until they sign the player or until the team renounces the player or loses his draft rights. In other words, so long as the player remains under contract with a non-NBA team, a cap hold for the player’s rookie scale amount is added to his drafting team’s team salary on July 1st of every year[1] and will taken off when the regular season starts.[2]

All NBA teams have Draft Rights to their draft picks, or the exclusive right to negotiate and sign them for a period of one year. Because of the designated rookie scale amounts, almost all first round draft picks are signed without issue. But how exactly do NBA teams with Eurostash players keep these exclusive rights when Eurostash players often don’t sign for multiple years ? Under Article X, Section 5(a), the team that drafts a Eurostash player keeps the exclusive rights to negotiate and sign him for one year from the earlier of (i) the date the player notifies his drafting team that he is available to sign a contract or (ii) the NBA Draft occurring in the period from September 1st-August 30th in which the player notifies his drafting team of his availability and intention to play in the NBA for the season following such 12 month period.

If the Eurostash player has not signed with the team that holds his draft rights after 3 years, his draft team has a choice of how to sign him under Article VIII, Section 2. The team may either sign him to a rookie scale contract or, if the team has cap room, sign him to a contract other than the rookie scale as long as it is more than 120% of the rookie scale and is for at least three years. This is why Mirotic, for example, as a 2014-15 rookie was paid $5,305,000, just barely below the contract amount applied to Andrew Wiggins ($5,5120,640), the first overall draft pick in the 2014 NBA Draft. This can be helpful for NBA teams because many Eurostash players need to be bought out of their current professional, non-NBA contracts. However, the amount teams can put toward buying out their Eurostash player’s contract is capped and any amount above that cap is treated as a bonus to the player that comes out of his NBA salary.[3]

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[1] Under the rules, if the player’s international contract ends before July 1st, the cap hold is applied as soon as the contract ends.

[2] Teams can avoid having the Eurostash cap hold applied to their team salary in one of two ways. First, the team can write a letter to the league stating that it does not intend to sign its Eurostash player in the upcoming offseason or regular season. This letter must be accompanied by a letter from the first round draft pick renouncing his right to accept any outstanding Required Tender during that time. Second, the team can renounce they player’s Draft Rights, making them a free agent.

[3] The bonus is also capped at 15% of the value of the player’s entire contract.

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