Kernel Panic following a RHEL 6 to RHEL 7 upgrade with error cp: cannot create hard link

Issue

• After an upgrade from RHEL 6 to RHEL 7, the system is not able to boot anymore with message:

  [    1.992450] No filesystem could mount root, tried:
  [    1.993463] Kernel panic - not syncing: VFS: Unable to mount root fs on unknown-block(0,0)
  

• Earlier during the upgrade process, we can notice multiple errors:

  [  174.407064] upgrade[4951]: warning: %postun(bash-4.1.2-48.el6.x86_64) scriptlet failed, exit status 127
  [  174.409074] upgrade[4951]: Warning: non-fatal %postun scriptlet failure in bash-4.1.2-48.el6 (exit code 0)
  ...
  [  174.839621] upgrade[4951]: upgrade finished.
  [  174.840847] upgrade-post[11666]: starting upgrade-post hook
  [  174.842297] upgrade-post[11666]: Running postupgrade scripts...
  [  174.843957] upgrade[4951]: chroot: failed to run command '/bin/sh': No such file or directory
  [  174.845617] upgrade-post[11666]: Running /root/preupgrade/postupgrade.d/00_subscription-manager.sh...
  [  174.847482] upgrade[4951]: chroot: failed to run command '/bin/sh': No such file or directory
  [  174.849154] upgrade-post[11666]: chroot: failed to run command '/bin/sh': No such file or directory
  [  174.850997] upgrade-post[11666]: Running /root/preupgrade/postupgrade.d/clean_rhel6_pkgs/postupgrade_cleanup.sh...
  

• And the message finished with non-fatal errors. is not true:

  [  174.838257] upgrade[4951]:  finished with non-fatal errors.
  [  174.839621] upgrade[4951]: upgrade finished.
  

• But the first error during the upgrade boot is:

   Reached target System Upgrade.
           Starting System Upgrade (pre)...
  [   33.310606] upgrade-pre[4909]: starting upgrade-pre hook
  [   33.337455] upgrade-pre[4909]: Converting /var/lock to symlink
  [   33.351678] upgrade-pre[4909]: Make a copy of `/sysroot/usr/bin'.
  [   33.376284] upgrade-pre[4909]: cp: cannot create hard link '/sysroot/usr/bin.usrmove-new/timeout' to '/sysroot/usr/bin/timeout': Operation not permitted
  [   33.381909] upgrade-pre[4909]: Something failed. Move back to the original state
  [   33.388471] [^[[32m  OK  ^[[0m] Started System Upgrade (pre).