All database settings are set to 'A'
Silly me. I copied some lines from D6 settings.php. After adding an extra ['default'] here: $databases['default']['default'] = array(... things are working fine again.



Note 1: Probably good to not delete this question as someone else might run into something similar at some point.

Note 2: Will be nice if Drupal 8+ will have a more informative way of error reporting.