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

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