The state of the loo’s atrocious (7)
I believe the answer is:
lesotho
'the state' is the definition.
(Lesotho is an example)
'the loo's atrocious' is the wordplay.
'atrocious' indicates anagramming the letters.
'the'+'loos'='theloos'
'theloos' is an anagram of 'LESOTHO'.
'of' acts as a link.
(Other definitions for lesotho that I've seen before include "Independent kingdom, an enclave of South Africa" , "South African kingdom" , "Country, an enclave of South Africa, capital Maseru" , "Kingdom within South Africa" , "African territory" .)