Welcome to the Q&A Forum

As per my information sub domains are considered to be the part of the same domain for quite some time now (http://www.seroundtable.com/subdomains-google-webmaster-tools-13960.html) but as per my experience the sub domain value is not as powerful as sub directory so the ranking drop is very much expected. My advice to you is to sit with the IT person and come up with some alternate solutions ot this problem and in case this is the only solution, in that case plan a powerful marketing strategy and execute it once you restructure the domains to reduce the loss to minimum. Hope this helps!