Treated hide of last horse, covered in foam (7)
I believe the answer is:
leather
'treated hide' is the definition.
(I've seen this before)
'last horse covered in foam' is the wordplay.
'last horse' becomes 'e' (I am not sure about this - if you are sure you should believe this answer much more).
'covered in' is an insertion indicator.
'foam' becomes 'lather' (lathering is a kind of foaming).
'e' inserted into 'lather' is 'LEATHER'.
'of' is the link.
Can you help me to learn more?
(Other definitions for leather that I've seen before include "kid, perhaps" , "polish" , "Morocco, perhaps" , "Polishing cloth" , "durable material" .)