Yes, this money will be burnt up just like the other millions this airline has used up.
However: there are two reasons for this state-backed loan.
Firstly, there are elections coming up. If the government was to let thousands of German holidaymakers get stranded due to one of the major airlines folding, this would come to hound them.
And secondly, there has been quite some lobbying by LH who has wetleased nearly 40 of ABs aircraft for use on their own network (some for LH, some for OS). Were AB to halt all of their flying operations, as would have been required, was German insolvency law followed strictly if there had been no such loan, this would have dealt quite a blow to LHs operation as well.
So this loan is to buy AB some time to allow closure of the ongoing negotiations between them and LH on taking over some parts of the failing company, possibly including employees. Had AB folded today, there would have been a gap usable for FR and the like and the loss of German jobs would have been inevitable (see also the previous words on the upcoming election).
IŽd expect there to be an agreement within a few days to weeks: LH will take over some profitable parts of AB, some slots may go to U2, and the rest of the airline will be scrapped possibly at the end of October.