I tried this again from a fresh install.

Just want to add that after doing the dist-upgrade, simply running 'bundle install' from /usr/share/metasploit-framework/ does not resolve the issue even though rex-text is mentioned in the output when running 'bundle install'.

Output of 'bundle install' from /usr/share/metasploit-framework

Don't run Bundler as root. Bundler can ask for sudo if it is needed, and installing your bundle as root will
break this application for all non-root users on this machine.
Using rake 11.2.2
Using i18n 0.7.0
Using json 1.8.3
Using minitest 5.9.0
Using thread_safe 0.3.5
Using builder 3.2.2
Using erubis 2.7.0
Using mini_portile2 2.1.0
Using pkg-config 1.1.7
Using rack 1.6.4
Using arel 6.0.3
Using addressable 2.4.0
Using bcrypt 3.1.11
Using bit-struct 0.15.0
Using docile 1.1.5
Using multipart-post 2.0.0
Using filesize 0.1.1
Using rkelly-remix 0.0.6
Using metasm 1.0.2
Using thor 0.19.1
Using pg 0.18.4
Using pg_array_parser 0.0.9
Using rubyntlm 0.6.0
Using rubyzip 1.2.0
Using metasploit-payloads 1.1.13
Using metasploit_payloads-mettle 0.0.5
Using msgpack 1.0.0
Using network_interface 0.0.1
Using openssl-ccm 1.2.1
Using pcaprub 0.12.4
Using patch_finder 1.0.2
Using rb-readline-r7 0.5.2.0
Using redcarpet 3.3.4
Using rex-java 0.1.2
Using rex-text 0.1.1
Using rex-registry 0.1.0
Using robots 0.10.1
Using sqlite3 1.3.11
Using sshkey 1.8.0
Using simplecov-html 0.10.0
Using bundler 1.12.5
Using tzinfo 1.2.2
Using nokogiri 1.6.8
Using rack-test 0.6.3
Using faraday 0.9.2
Using jsobfu 0.4.1
Using packetfu 1.1.11
Using rex-random_identifier 0.1.0
Using rex-zip 0.1.0
Using simplecov 0.12.0
Using activesupport 4.2.7
Using tzinfo-data 1.2016.6
Using loofah 2.0.3
Using recog 2.0.21
Using sawyer 0.7.0
Using rex-powershell 0.1.0
Using rails-deprecated_sanitizer 1.0.3
Using activemodel 4.2.7
Using rails-html-sanitizer 1.0.3
Using octokit 4.3.0
Using rails-dom-testing 1.0.7
Using activerecord 4.2.7
Using actionview 4.2.7
Using arel-helpers 2.3.0
Using postgres_ext 3.0.0
Using actionpack 4.2.7
Using railties 4.2.7
Using metasploit-concern 2.0.1
Using metasploit-model 2.0.0
Using metasploit_data_models 2.0.0
Using metasploit-credential 2.0.3
Using metasploit-framework 4.12.14 from source at .
Bundle complete! 14 Gemfile dependencies, 72 gems now installed.
Gems in the groups development and test were not installed.
Bundled gems are installed into ./vendor/bundle.

Running the ruby script directly means running outside of the bundle... so it doesn't find the gem. You should try to execute it through "bundle exec tools/exploit/pattern_create.rb 500". Does it work that way when run from /usr/share/metasploit-framework/ ?

Version 4.12.11 added “gem 'rex-text'” line and only that line in this script. I'm not sure why. It might be worth asking upstream the reason for this.

Here's the change I mentioned:
http://git.kali.org/gitweb/?p=packages/metasploit-framework.git;a=commitdiff;h=41be45450076022d23720d3a27f86d355a04f82f#patch110

Running 'bundle exec tools/exploit/pattern_create.rb 500' from /usr/share/metasploit-framework does work.

Note that it looks like they added a -l switch to specify length of the patterns now, so the command above will complain about missing arguments to pattern_create.rb, but the script does execute without the gem error.

Works from the msfconsole prompt as well. You'll need to specify the full path to pattern_create.rb when running it.

So if I understand correctly the gems required for this script are in a seperate, isolated Ruby environment (bundle?) for metasploit-framework and are not 'visible' to Ruby when just running from the terminal? Like virtualenv in Python.

Not that big a deal to have to 'bundle exec' or run from msfconsole I guess but it is a change from how these scripts could be executed previously.

Regarding following up with upstream about the reasons for this, is that something I should do? What is the upstream being referred to in this case? Raise an issue on metasploit-framework github?

I filed this ticket against metasploit: https://github.com/rapid7/metasploit-framework/issues/7123

@pgrohe, yes bundler is ruby's virtualenv. Let's see what upstream has to say on the issue I filed.

the new version 4.12.15-0kali2 fixes this issue (we change the ruby interpreter of the tools/exploit/*.rb files)