Celtics create $28.5 million trade exception in Gordon Hayward sign and trade with Hornets

UPDATE: Gordon Hayward’s first-year salary the Charlotte Hornets will be approximately $28.5 million. This article has been updated with those details.

The Boston Celtics have signed and traded Gordon Hayward to the Charlotte Hornets. No less an authority than the Celtics themselves confirmed the news:

The Celtics will reportedly send unprotected picks in both 2023 and 2024 to the Hornets to complete this deal. Boston will acquire a heavily protected second round pick from Charlotte.

Boston has an extra second round pick in 2023, but it already has protections attached to it. Boston has only their own second round pick in 2024. That means the picks the Celtics are sending to the Hornets are likely their own.

Charlotte is likely to send a top-55 protected second rounder to Boston.

But picks, and Hayward, are really of no concern to the Celtics here. Danny Ainge structured this deal as a sign and trade in order to create a giant traded player exception (TPE).

Because Hayward’s first-year salary is approximately $28.5 million, Boston will create a TPE equal to that value. That $28.5 million TPE is the largest in NBA history.

The TPE created by the Celtics will expire one year from the date of the trade. Meaning, Boston will have until 11/29/21 to use the TPE.

How the Celtics can use the TPE varies. Primarily, TPEs are used to acquire a player via trade. They can also be used to claim a player off waivers.

They key is that the salary, or salaries, for whatever player is being acquired must fit within the trade exception. TPEs cannot be combined with other TPEs, nor can they be aggregated with outgoing player salaries. Meaning, Boston couldn’t add a $10 million salary to bring in a player who makes nearly $38 million.

To clear up a common misconception, Boston can trade a player in a deal where they use the trade exception. The Celtics just can’t combine that player’s salary to the trade exception to bring in a bigger salary. This means Boston could trade someone who makes a relatively small salary, while bringing in a much larger salary that fits within the Hayward TPE.

What the Celtics can do is acquire a player who makes up to $28.6 million (the $28.5 million TPE plus the $100,000 allowed in salary-matching). Or, and this is a regular occurrence in the NBA, the TPE could be split and used to acquire multiple players that have a combined salary of up to $28.5 million.

One other consideration: The Celtics can functionally only use about $21.8 million of the trade exception as it stands right now. Because Boston has already committed to giving Tristan Thompson the full Non-Taxpayer Midlevel Exception, the Celtics will be hard capped.

Right now, Boston is roughly $32.7M under the hard cap. They’re giving $9,258,000 to Thompson and $1,620,564 to Jeff Teague. That leaves the Celtics with about $21.8 million in room under the hard cap after they sign Thompson and Teague.

Now, Boston could increase their ability to use more of the TPE, if they send out some additional salary in a trade. But as it stands right now, Boston is limited to using $21.8 million.

Boston also has smaller TPEs of $4.7 million and $2.5 million from the Enes Kanter and Vincent Poirier trades, respectively.

Having a TPE for Hayward gives Ainge flexibility as he builds out the 2020-21 Celtics roster for the remainder of this offseason and up to the trade deadline. If Ainge is unable to find a deal he likes, this TPE can be rolled over and used leading up to the 2021 NBA Draft or during 2021 free agency.

The first step for the Celtics was to get something for Hayward vs losing him for nothing. Let’s say it is mission half accomplished for Ainge. To complete the second half of that objective, Ainge now needs to use the TPE to add a quality player, or players, to Boston’s rotation sometime in the next year.