The formalism of the two-center expansion of the long-range interaction potential is extended to molecules which may be in a degenerate state. As a consequence of this degeneracy the common long-range interaction coefficients have to be replaced by "long-range interaction matrices." The formalism is applied to the OH-CO complex and leads to an accurate description of the long-range part of its potential surfaces. The reduced spectra that represent the dynamic polarizabilities of the subsystems are obtained in the single excitation multi-reference averaged coupled pair approach. They also serve to calculate the interaction matrices.