generator-jhipster: Broken jhipster:upgrade in 3.12.0

Overview of the issue

yo jhipster:upgrade fails to upgrade project. Seems like the problem is in the second stage which should update jhipster and regenerate project using its new version. In some projects it also reverts jhipster version in .yo-rc to 3.10.0.

Successfully regenerated app with jhipster 3.11.0
Committed with message "Generated with JHipster 3.11.0"
Checked out branch "master"
Current code recorded as generated with version 3.11.0
Updating generator-jhipster. This might take some time...
Updated generator-jhipster to version 3.12.0
Checked out branch "jhipster_upgrade"
Cleaned up directory
Regenerating app with jhipster 3.12.0...
 
        ██  ██    ██  ████████  ███████    ██████  ████████  ████████  ███████
        ██  ██    ██     ██     ██    ██  ██          ██     ██        ██    ██
        ██  ████████     ██     ███████    █████      ██     ██████    ███████
  ██    ██  ██    ██     ██     ██             ██     ██     ██        ██   ██
   ██████   ██    ██  ████████  ██        ██████      ██     ████████  ██    ██

                            http://jhipster.github.io

Welcome to the JHipster Generator v3.11.0
Documentation for creating an application: https://jhipster.github.io/creating-an-app/
Application files will be generated in folder: /home/ashakhov/jh-test
 ______________________________________________________________________________

  JHipster update available: 3.12.0 (current: 3.11.0)
  Run npm install -g generator-jhipster to update.
 ______________________________________________________________________________

This is an existing project, using the configuration from your .yo-rc.json file 
to re-generate the project...

Reproduce the error

yo jhipster:upgrade

JHipster Version(s)

Trying to update project generated with 3.11.0 to 3.12.0.

jhipster@0.0.0 /home/ashakhov/jh-test
└── generator-jhipster@3.11.0 

JHipster configuration, a .yo-rc.json file generated in the root folder

{
  "generator-jhipster": {
    "jhipsterVersion": "3.11.0",
    "baseName": "jhipster",
    "packageName": "com.mycompany.myapp",
    "packageFolder": "com/mycompany/myapp",
    "serverPort": "8080",
    "authenticationType": "session",
    "hibernateCache": "ehcache",
    "clusteredHttpSession": false,
    "websocket": false,
    "databaseType": "sql",
    "devDatabaseType": "h2Disk",
    "prodDatabaseType": "mysql",
    "searchEngine": false,
    "messageBroker": false,
    "buildTool": "maven",
    "enableSocialSignIn": false,
    "rememberMeKey": "e0051e23b0c3f2b739ed8aab4ccb32a87ce74969",
    "useSass": false,
    "applicationType": "monolith",
    "testFrameworks": [
      "gatling"
    ],
    "jhiPrefix": "jhi",
    "enableTranslation": true,
    "nativeLanguage": "en",
    "languages": [
      "en"
    ]
  }
}

Entity configuration(s) entityName.json files generated in the .jhipster directory

ls: no such file or directory: .jhipster/*.json

Browsers and Operating System

ubuntu 14.04.5 java version “1.8.0_111” Java™ SE Runtime Environment (build 1.8.0_111-b14) Java HotSpot™ 64-Bit Server VM (build 25.111-b14, mixed mode)

git version 1.9.1 node: v4.6.2 npm: 4.0.2 bower: 1.8.0

gulp: [15:00:51] CLI version 1.2.2 [15:00:51] Local version 3.9.1

yeoman: 1.8.5