As suggested here:

http://askubuntu.com/questions/76981/cannot-make-wi-fi-hotspot

the workaround is to do a

sudo killall dnsmasq

before creating the hotspot.

You need to do that every time. I have not idea how to automate it.

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https://bugs.launchpad.net/bugs/857294

Title:
  Creating hotspot leads to endless connect/disconnect loop

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