Like 1st post, exactly the same for me with new kernel 4.4.0-42.62

Hardware: Dell E5410/4GB i5/512Gb SSD, 16.04.1 LTS 64b full root

Drop to initramfs without prompting to enter luks password.

Boot back with previous 4.4.0-38.57 is fine, no solution with update-initramfs 

Can I test something ?

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  4.4.0-40-generic no prompts for disk encryption + loops on dots load

Status in linux package in Ubuntu:
  Fix Committed
Status in linux source package in Xenial:
  Fix Committed

Bug description:
  Since the upgrade to Ubuntu's 16.04.1 Linux kernel 4.4.0-40.60, it is 
impossible to boot my machine with full root encryption. 
  It will keep loading the purple Ubuntu "dots" loading screen for ages and 
stay there.

  There is no issue rebooting back with kernel 4.4.0-38.57.

  I tried recreating the initramfs to no avail:
  update-initramfs -d -u -k 4.4.0-40-generic

  Hardware is a Dell Laptop: XPS13 9350 16GB/i7/512GB SSD.

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