RHV-H upgrade fails with "Failed to reinstall persisted RPMs" error

Issue

RHV-H upgrade fails with following error message

2020-12-25 17:05:50,160 [ERROR] (MainThread) Failed to reinstall persisted RPMs
Traceback (most recent call last):
  File "/tmp/tmp.A4NZx4MGiK/usr/lib/python3.6/site-packages/imgbased/plugins/rpmpersistence.py", line 94, in install
    subprocess.check_output(cmd, stderr=subprocess.STDOUT)
  File "/usr/lib64/python3.6/subprocess.py", line 356, in check_output
    **kwargs).stdout
  File "/usr/lib64/python3.6/subprocess.py", line 438, in run
    output=stdout, stderr=stderr)
subprocess.CalledProcessError: Command '['systemd-nspawn', '--uuid', '143fa04bde8948748c6ae219b178bd6b', '--machine', 'test', '-D', '/tmp/mnt.6G1rQ//', 'yum', 'install', '-y', '--noplugins', '/var/imgbased/persisted-rpms/vdsm-hook-nestedvt-4.40.26.3-1.el8ev.noarch.rpm', '/var/imgbased/persisted-rpms/vdsm-hook-nestedvt-4.40.35.1-1.el8ev.noarch.rpm']' returned non-zero exit status 1.