>Hi guys,
>
>Has anyone else run into issues with iBGP sessions not coming up after
>upgrading to 8.5?

Never tried 8.5, however I would recommend to test modifying the bgp config 
that way, on both side :

group ibgp-XXXXX {
    type internal;
    local-address x.x.x.2;
    advertise-inactive;
    export announce-to-XXXXX;
    multipath multiple-as;
    neighbor x.x.x.1;
}

Ie : removing the peer-as keyword (that's iBGP), and setting the type internal. 
I have seen strange behaviour sometimes dealing with the peer-as knob on iBGP.


Stephane.
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