First LXC container takes over all pty's, even for the host

Hi,

upgraded old debian LXC host in several steps to the latest bullseye (kernel 6.0 from bullseye-backports). Upon starting first container, the host is not accessible over ssh anymore:

PTY allocation request failed on channel 0

Login through console (/dev/tty) is OK. The running container is accessible through SSH.

But no other container would start - also terminal problem:

lxc-start test 20221221120443.928 INFO     lsm - lsm/lsm.c:lsm_init:40 - Initialized LSM security driver AppArmor
lxc-start test 20221221120443.928 ERROR    terminal - terminal.c:lxc_terminal_create_foreign:871 - Invalid argument - Failed to open terminal
lxc-start test 20221221120443.928 ERROR    start - start.c:lxc_init:813 - Failed to create console
lxc-start test 20221221120443.928 ERROR    start - start.c:__lxc_start:1945 - Failed to initialize container "test"

Container which takes-over all pttys:

orion:/etc# mount | grep devpts
devpts on /dev/console type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=000,max=65000)
devpts on /dev/pts type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=666,max=1024)
devpts on /dev/ptmx type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=666,max=1024)
devpts on /dev/tty1 type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=666,max=1024)
devpts on /dev/tty2 type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=666,max=1024)
devpts on /dev/tty3 type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=666,max=1024)
devpts on /dev/tty4 type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=666,max=1024)

LXC Host:

root@hermes:~# mount | grep devpts
devpts on /dev/pts type devpts (rw,nosuid,noexec,relatime,gid=5,mode=620,ptmxmode=000,max=65000)

A fresh-new created container (lxc-create -n test -t debian – -r bullseye) does the same, i.e. may not be an issue with non-systemd container (which is the case for the other containers). Clearly there is some issue with pty/pts mounts, probably due to upgrading from older debian versions. Please can anyone point me at a direction to fix this issue?

Thanks a lot in advance.

Pavel.