HRE, the biggest German victim of the global financial crisis, has already had €50 billion in state aid and €30 billion in guarantees.
"The German Financial Markets Stabilisation Fund has extended its framework guarantee granted to Hypo Real Estate Group by an additional €12 billion, bringing the aggregate guarantee amount to €42 billion," the bank said.
The bank said it "can use the additional guarantees ... to collateralise debt securities to be issued, which must be due for repayment by June 12, 2009 at the latest."
HRE was a frontline casualty when the high risk US subprime mortgage market collapsed, putting the global financial system under unprecedented stress. Even with the huge aid given has not been enough to get HRE back on its feet.
A spokesman for Chancellor Angela Merkel's Christian Democrats said last week the government could buy one third or more of the troubled property lender. The government has already partially nationalised the second biggest German bank, Commerzbank.
In December, HRE said it would slash its workforce by almost half in three years, part of a series of draconian moves to save it from bankruptcy. HRE posted a net loss of €3.1 billion in the third quarter of 2008 and said it expects additional losses in its fourth quarter and annual results.
Berlin has set up a banking sector rescue package that is to provide up to €80 billion in cash injections and €400 billion in loan guarantees to prevent a collapse of the financial sector.