[Red Hat Satellite 5] - Upgrade RHN Proxy 5.7 -> 5.8 fails with unknown error - <Fault 1046: 'redstone.xmlrpc.XmlRpcFault: proxy_channel_not_found'>

Issue

When trying to active RHN Proxy 5.8 it fails with the following error:

[root@proxy ~]# rhn-proxy-activate --server=satellite.example.redhat.com --version=5.8 --ca-cert=/usr/share/rhn/RHN-ORG-TRUSTED-SSL-CERT 

--server (RHN parent):  satellite.example.redhat.com 
--http-proxy:           
--http-proxy-username:  
--http-proxy-password:  
--ca-cert:              /usr/share/rhn/RHN-ORG-TRUSTED-SSL-CERT
--no-ssl:               false
--version:              5.8

Are you sure about these options? y/n: y
Red Hat Satellite Proxy successfully deactivated.

There was a problem activating the Red Hat Satellite Proxy entitlement:
ERROR: upon entitlement/activation attempt: unknown error - <Fault 1046: 'redstone.xmlrpc.XmlRpcFault: proxy_channel_not_found'>