there was a related case in bug 1664622.
The TL;DR of this was:
1. even with all qemu patches identified by IBM and upstream while working on
this the issue still showed up.
2. newer kernels (>=4.8, but also newer 4.4 kernels than those on the release
itself worked - that matches the report here)
3. the conclusion was that nothing can/has-to be done for qemu 
4. there was no way to fix the initial 16.04.0 iso, but that was considered ok
since 16.04.2 worked
Mapping to this bug here it seems that a further update to 4.4 might
have broken it "again" as identified by Gustavo in in this report.
I added all this to complete the context for everybody else, but for now
qemu stays at won't fix for the reasons and assumptions haven't changed
since our last check on this issue.
On the kernel surely if the identified two patches really need to go
together a fix might be needed, but that is for the kernel Team to
** Changed in: qemu (Ubuntu)
Status: New => Won't Fix
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KVM on 16.04.3 throws an error
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